Correlation Between Wyndham Hotels and FAT Brands

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

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

Diversification Opportunities for Wyndham Hotels and FAT Brands

0.9

Correlation Coefficient

Wyndham Hotels  FAT Brands

Almost no diversification

The 3 months correlation between Wyndham and FAT is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands and Wyndham Hotels 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 Hotels Resorts are associated (or correlated) with FAT Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAT Brands has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and FAT Brands go up and down completely randomly.

Pair Corralation between Wyndham Hotels and FAT Brands

Allowing for the 90-day total investment horizon Wyndham Hotels Resorts is expected to generate 0.93 times more return on investment than FAT Brands. However, Wyndham Hotels Resorts is 1.08 times less risky than FAT Brands. It trades about 0.18 of its potential returns per unit of risk. FAT Brands is currently generating about 0.06 per unit of risk. If you would invest  7,732  in Wyndham Hotels Resorts on October 3, 2024 and sell it today you would earn a total of  2,347  from holding Wyndham Hotels Resorts or generate 30.35% return on investment over 90 days.

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

Wyndham Hotels Resorts  vs.  FAT Brands

Wyndham Hotels Resorts

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Wyndham Hotels demonstrated solid returns over the last few months and may actually be approaching a breakup point.

FAT Brands

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FAT Brands are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, FAT Brands unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wyndham Hotels and FAT Brands

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

The idea behind Wyndham Hotels Resorts and FAT Brands 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.