Correlation Between Goodyear Tire and Wyndham Hotels

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Goodyear Tire 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 Goodyear Tire and Wyndham Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Goodyear Tire Rubber and Wyndham Hotels Resorts, you can compare the effects of market volatilities on Goodyear Tire 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 Goodyear Tire with a short position of Wyndham Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Tire and Wyndham Hotels.

Diversification Opportunities for Goodyear Tire and Wyndham Hotels

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Goodyear and Wyndham is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Tire Rubber 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 Goodyear Tire 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 Goodyear Tire Rubber 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 Goodyear Tire i.e., Goodyear Tire and Wyndham Hotels go up and down completely randomly.

Pair Corralation between Goodyear Tire and Wyndham Hotels

Assuming the 90 days trading horizon Goodyear Tire is expected to generate 5.09 times less return on investment than Wyndham Hotels. In addition to that, Goodyear Tire is 2.1 times more volatile than Wyndham Hotels Resorts. It trades about 0.02 of its total potential returns per unit of risk. Wyndham Hotels Resorts is currently generating about 0.22 per unit of volatility. If you would invest  9,065  in Wyndham Hotels Resorts on September 19, 2024 and sell it today you would earn a total of  685.00  from holding Wyndham Hotels Resorts or generate 7.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Goodyear Tire Rubber  vs.  Wyndham Hotels Resorts

 Performance 
       Timeline  
Goodyear Tire Rubber 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goodyear Tire unveiled solid returns over the last few months and may actually be approaching a breakup point.
Wyndham Hotels Resorts 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
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 fragile basic indicators, Wyndham Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Goodyear Tire and Wyndham Hotels Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Goodyear Tire and Wyndham Hotels

The main advantage of trading using opposite Goodyear Tire and Wyndham Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodyear Tire 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 Goodyear Tire Rubber 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

Other Complementary Tools

AI Portfolio Architect
Use AI to generate optimal portfolios and find profitable investment opportunities
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Global Correlations
Find global opportunities by holding instruments from different markets
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device