Correlation Between Wyndham Hotels and Red Rock

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

Diversification Opportunities for Wyndham Hotels and Red Rock

0.84

Correlation Coefficient

Wyndham Hotels  Red Rock

Very poor diversification

The 3 months correlation between Wyndham and Red is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Red Rock Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Rock Resorts 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 Red Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Rock Resorts has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Red Rock go up and down completely randomly.

Pair Corralation between Wyndham Hotels and Red Rock

Allowing for the 90-day total investment horizon Wyndham Hotels Resorts is expected to under-perform the Red Rock. But the stock apears to be less risky and, when comparing its historical volatility, Wyndham Hotels Resorts is 1.18 times less risky than Red Rock. The stock trades about -0.11 of its potential returns per unit of risk. The Red Rock Resorts is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,806  in Red Rock Resorts on December 17, 2024 and sell it today you would lose (267.00) from holding Red Rock Resorts or give up 5.56% of portfolio value over 90 days.

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

Wyndham Hotels Resorts  vs.  Red Rock Resorts

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.

Red Rock Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Rock Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Red Rock 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 Red Rock

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

The idea behind Wyndham Hotels Resorts and Red Rock Resorts 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.