Correlation Between Wyndham Hotels and Portillos

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

Diversification Opportunities for Wyndham Hotels and Portillos

-0.7

Correlation Coefficient

Wyndham Hotels  Portillos

Excellent diversification

The 3 months correlation between Wyndham and Portillos is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Portillos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portillos 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 Portillos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portillos has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Portillos go up and down completely randomly.

Pair Corralation between Wyndham Hotels and Portillos

Allowing for the 90-day total investment horizon Wyndham Hotels Resorts is expected to generate 0.55 times more return on investment than Portillos. However, Wyndham Hotels Resorts is 1.83 times less risky than Portillos. It trades about 0.07 of its potential returns per unit of risk. Portillos is currently generating about -0.03 per unit of risk. If you would invest  6,964  in Wyndham Hotels Resorts on October 24, 2024 and sell it today you would earn a total of  3,620  from holding Wyndham Hotels Resorts or generate 51.98% return on investment over 90 days.

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

Wyndham Hotels Resorts  vs.  Portillos

Wyndham Hotels Resorts

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical indicators, Wyndham Hotels demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Portillos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Portillos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Wyndham Hotels and Portillos

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

The idea behind Wyndham Hotels Resorts and Portillos 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.