Correlation Between Wyndham Hotels and McDonalds

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

Diversification Opportunities for Wyndham Hotels and McDonalds

-0.28

Correlation Coefficient

Wyndham Hotels  McDonalds

Very good diversification

The 3 months correlation between Wyndham and McDonalds is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds 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 McDonalds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and McDonalds go up and down completely randomly.

Pair Corralation between Wyndham Hotels and McDonalds

Allowing for the 90-day total investment horizon Wyndham Hotels Resorts is expected to under-perform the McDonalds. In addition to that, Wyndham Hotels is 1.27 times more volatile than McDonalds. It trades about -0.1 of its total potential returns per unit of risk. McDonalds is currently generating about 0.11 per unit of volatility. If you would invest  28,794  in McDonalds on December 29, 2024 and sell it today you would earn a total of  2,475  from holding McDonalds or generate 8.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Wyndham Hotels Resorts  vs.  McDonalds

Wyndham Hotels Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wyndham Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

McDonalds

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, McDonalds may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Wyndham Hotels and McDonalds

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

The idea behind Wyndham Hotels Resorts and McDonalds 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.