Correlation Between Wyndham and Emerson Electric

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

By analyzing existing cross correlation between Wyndham Destinations 45 and Emerson Electric, you can compare the effects of market volatilities on Wyndham and Emerson Electric 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 Wyndham with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wyndham and Emerson Electric.

Diversification Opportunities for Wyndham and Emerson Electric

0.08

Correlation Coefficient

Wyndham  Emerson Electric

Significant diversification

The 3 months correlation between Wyndham and Emerson is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Destinations 45 and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Wyndham 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 Wyndham Destinations 45 are associated (or correlated) with Emerson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Electric has no effect on the direction of Wyndham i.e., Wyndham and Emerson Electric go up and down completely randomly.

Pair Corralation between Wyndham and Emerson Electric

Assuming the 90 days trading horizon Wyndham Destinations 45 is expected to under-perform the Emerson Electric. But the bond apears to be less risky and, when comparing its historical volatility, Wyndham Destinations 45 is 7.0 times less risky than Emerson Electric. The bond trades about -0.07 of its potential returns per unit of risk. The Emerson Electric is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  11,043  in Emerson Electric on October 10, 2024 and sell it today you would earn a total of  1,025  from holding Emerson Electric or generate 9.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Wyndham Destinations 45  vs.  Emerson Electric

Wyndham Destinations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wyndham Destinations 45 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Wyndham is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Emerson Electric

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal primary indicators, Emerson Electric may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Wyndham and Emerson Electric

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

The idea behind Wyndham Destinations 45 and Emerson Electric 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.