Correlation Between United Utilities and WYNDHAM

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

By analyzing existing cross correlation between United Utilities Group and WYNDHAM DESTINATIONS INC, you can compare the effects of market volatilities on United Utilities 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 United Utilities with a short position of WYNDHAM. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and WYNDHAM.

Diversification Opportunities for United Utilities and WYNDHAM

0.28

Correlation Coefficient

United Utilities  WYNDHAM

Modest diversification

The 3 months correlation between United and WYNDHAM is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and WYNDHAM DESTINATIONS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WYNDHAM DESTINATIONS INC and United Utilities 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 United Utilities Group 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 INC has no effect on the direction of United Utilities i.e., United Utilities and WYNDHAM go up and down completely randomly.

Pair Corralation between United Utilities and WYNDHAM

Assuming the 90 days horizon United Utilities Group is expected to under-perform the WYNDHAM. In addition to that, United Utilities is 3.37 times more volatile than WYNDHAM DESTINATIONS INC. It trades about -0.13 of its total potential returns per unit of risk. WYNDHAM DESTINATIONS INC is currently generating about 0.06 per unit of volatility. If you would invest  10,083  in WYNDHAM DESTINATIONS INC on December 24, 2024 and sell it today you would earn a total of  157.00  from holding WYNDHAM DESTINATIONS INC or generate 1.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.33%
Values	Daily Returns

United Utilities Group  vs.  WYNDHAM DESTINATIONS INC

United Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Utilities Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

WYNDHAM DESTINATIONS INC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WYNDHAM DESTINATIONS INC are ranked lower than 4 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Utilities and WYNDHAM

The main advantage of trading using opposite United Utilities and WYNDHAM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities 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 United Utilities Group and WYNDHAM DESTINATIONS INC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.