Correlation Between Wyndham Hotels and Restaurant Brands

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

Diversification Opportunities for Wyndham Hotels and Restaurant Brands

-0.43

Correlation Coefficient

Wyndham Hotels  Restaurant Brands

Very good diversification

The 3 months correlation between Wyndham and Restaurant is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Restaurant Brands Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Restaurant 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 Restaurant Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Restaurant Brands has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Restaurant Brands go up and down completely randomly.

Pair Corralation between Wyndham Hotels and Restaurant Brands

Allowing for the 90-day total investment horizon Wyndham Hotels Resorts is expected to generate 1.19 times more return on investment than Restaurant Brands. However, Wyndham Hotels is 1.19 times more volatile than Restaurant Brands International. It trades about 0.07 of its potential returns per unit of risk. Restaurant Brands International is currently generating about 0.03 per unit of risk. If you would invest  6,568  in Wyndham Hotels Resorts on December 2, 2024 and sell it today you would earn a total of  4,265  from holding Wyndham Hotels Resorts or generate 64.94% return on investment over 90 days.

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

Wyndham Hotels Resorts  vs.  Restaurant Brands Internationa

Wyndham Hotels Resorts

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical indicators, Wyndham Hotels may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Restaurant Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Restaurant Brands International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Restaurant Brands is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Wyndham Hotels and Restaurant Brands

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

The idea behind Wyndham Hotels Resorts and Restaurant Brands International 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.