Correlation Between Fair Isaac and Wyndham Hotels

Can any of the company-specific risk be diversified away by investing in both Fair Isaac and Wyndham Hotels at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fair Isaac and Wyndham Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fair Isaac Corp and Wyndham Hotels Resorts, you can compare the effects of market volatilities on Fair Isaac and Wyndham Hotels and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fair Isaac with a short position of Wyndham Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fair Isaac and Wyndham Hotels.

Diversification Opportunities for Fair Isaac and Wyndham Hotels

0.84

Correlation Coefficient

Fair Isaac  Wyndham Hotels

Very poor diversification

The 3 months correlation between Fair and Wyndham is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Fair Isaac Corp and Wyndham Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wyndham Hotels Resorts and Fair Isaac is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fair Isaac Corp are associated (or correlated) with Wyndham Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wyndham Hotels Resorts has no effect on the direction of Fair Isaac i.e., Fair Isaac and Wyndham Hotels go up and down completely randomly.

Pair Corralation between Fair Isaac and Wyndham Hotels

Assuming the 90 days trading horizon Fair Isaac Corp is expected to under-perform the Wyndham Hotels. In addition to that, Fair Isaac is 1.38 times more volatile than Wyndham Hotels Resorts. It trades about -0.18 of its total potential returns per unit of risk. Wyndham Hotels Resorts is currently generating about 0.3 per unit of volatility. If you would invest  8,865  in Wyndham Hotels Resorts on September 21, 2024 and sell it today you would earn a total of  885.00  from holding Wyndham Hotels Resorts or generate 9.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Fair Isaac Corp  vs.  Wyndham Hotels Resorts

Fair Isaac Corp

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fair Isaac may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wyndham Hotels Resorts

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Wyndham Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fair Isaac and Wyndham Hotels

The main advantage of trading using opposite Fair Isaac and Wyndham Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fair Isaac position performs unexpectedly, Wyndham Hotels can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Wyndham Hotels will offset losses from the drop in Wyndham Hotels' long position.

The idea behind Fair Isaac Corp and Wyndham Hotels Resorts pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.