Correlation Between Skechers USA and Wyndham

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

By analyzing existing cross correlation between Skechers USA and Wyndham Destinations 4625, you can compare the effects of market volatilities on Skechers USA and Wyndham 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 Skechers USA with a short position of Wyndham. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skechers USA and Wyndham.

Diversification Opportunities for Skechers USA and Wyndham

0.02

Correlation Coefficient

Skechers USA  Wyndham

Significant diversification

The 3 months correlation between Skechers and Wyndham is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Skechers USA and Wyndham Destinations 4625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wyndham Destinations 4625 and Skechers USA 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 Skechers USA are associated (or correlated) with Wyndham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wyndham Destinations 4625 has no effect on the direction of Skechers USA i.e., Skechers USA and Wyndham go up and down completely randomly.

Pair Corralation between Skechers USA and Wyndham

Considering the 90-day investment horizon Skechers USA is expected to generate 5.27 times more return on investment than Wyndham. However, Skechers USA is 5.27 times more volatile than Wyndham Destinations 4625. It trades about 0.16 of its potential returns per unit of risk. Wyndham Destinations 4625 is currently generating about 0.02 per unit of risk. If you would invest  6,163  in Skechers USA on October 24, 2024 and sell it today you would earn a total of  1,183  from holding Skechers USA or generate 19.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	83.33%
Values	Daily Returns

Skechers USA  vs.  Wyndham Destinations 4625

Skechers USA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Skechers USA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Skechers USA showed solid returns over the last few months and may actually be approaching a breakup point.

Wyndham Destinations 4625

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Destinations 4625 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Wyndham is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Skechers USA and Wyndham

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

The idea behind Skechers USA and Wyndham Destinations 4625 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.