Correlation Between Wyndham Hotels and Great Elm

Can any of the company-specific risk be diversified away by investing in both Wyndham Hotels and Great Elm 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 Great Elm 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 Great Elm Capital, you can compare the effects of market volatilities on Wyndham Hotels and Great Elm 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 Great Elm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wyndham Hotels and Great Elm.

Diversification Opportunities for Wyndham Hotels and Great Elm

0.8

Correlation Coefficient

Wyndham Hotels  Great Elm

Very poor diversification

The 3 months correlation between Wyndham and Great is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Great Elm Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Elm Capital 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 Great Elm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Elm Capital has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Great Elm go up and down completely randomly.

Pair Corralation between Wyndham Hotels and Great Elm

Allowing for the 90-day total investment horizon Wyndham Hotels Resorts is expected to generate 6.89 times more return on investment than Great Elm. However, Wyndham Hotels is 6.89 times more volatile than Great Elm Capital. It trades about 0.21 of its potential returns per unit of risk. Great Elm Capital is currently generating about 0.1 per unit of risk. If you would invest  7,897  in Wyndham Hotels Resorts on October 9, 2024 and sell it today you would earn a total of  2,182  from holding Wyndham Hotels Resorts or generate 27.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.16%
Values	Daily Returns

Wyndham Hotels Resorts  vs.  Great Elm Capital

Wyndham Hotels Resorts

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Wyndham Hotels demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Great Elm Capital

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Capital are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Great Elm is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wyndham Hotels and Great Elm

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

The idea behind Wyndham Hotels Resorts and Great Elm Capital 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.