Correlation Between Flowers Foods and Hyatt Hotels

Can any of the company-specific risk be diversified away by investing in both Flowers Foods and Hyatt 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 Flowers Foods and Hyatt Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Flowers Foods and Hyatt Hotels, you can compare the effects of market volatilities on Flowers Foods and Hyatt 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 Flowers Foods with a short position of Hyatt Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flowers Foods and Hyatt Hotels.

Diversification Opportunities for Flowers Foods and Hyatt Hotels

0.7

Correlation Coefficient

Flowers Foods  Hyatt Hotels

Poor diversification

The 3 months correlation between Flowers and Hyatt is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Flowers Foods and Hyatt Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyatt Hotels and Flowers Foods 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 Flowers Foods are associated (or correlated) with Hyatt Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyatt Hotels has no effect on the direction of Flowers Foods i.e., Flowers Foods and Hyatt Hotels go up and down completely randomly.

Pair Corralation between Flowers Foods and Hyatt Hotels

Assuming the 90 days horizon Flowers Foods is expected to generate 0.77 times more return on investment than Hyatt Hotels. However, Flowers Foods is 1.31 times less risky than Hyatt Hotels. It trades about -0.12 of its potential returns per unit of risk. Hyatt Hotels is currently generating about -0.22 per unit of risk. If you would invest  1,946  in Flowers Foods on December 22, 2024 and sell it today you would lose (246.00) from holding Flowers Foods or give up 12.64% of portfolio value over 90 days.

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

Flowers Foods  vs.  Hyatt Hotels

Flowers Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flowers Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hyatt Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hyatt Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Flowers Foods and Hyatt Hotels

The main advantage of trading using opposite Flowers Foods and Hyatt Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flowers Foods position performs unexpectedly, Hyatt 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 Hyatt Hotels will offset losses from the drop in Hyatt Hotels' long position.

The idea behind Flowers Foods and Hyatt Hotels 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.