Correlation Between Wyndham Hotels and Wendys

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

Diversification Opportunities for Wyndham Hotels and Wendys

0.51

Correlation Coefficient

Wyndham Hotels  Wendys

Very weak diversification

The 3 months correlation between Wyndham and Wendys is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys 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 Wendys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Wendys has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Wendys go up and down completely randomly.

Pair Corralation between Wyndham Hotels and Wendys

Allowing for the 90-day total investment horizon Wyndham Hotels Resorts is expected to generate 1.03 times more return on investment than Wendys. However, Wyndham Hotels is 1.03 times more volatile than The Wendys Co. It trades about 0.28 of its potential returns per unit of risk. The Wendys Co is currently generating about -0.24 per unit of risk. If you would invest  8,876  in Wyndham Hotels Resorts on September 4, 2024 and sell it today you would earn a total of  904.00  from holding Wyndham Hotels Resorts or generate 10.18% return on investment over 90 days.

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

Wyndham Hotels Resorts  vs.  The Wendys Co

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 fragile technical indicators, Wyndham Hotels demonstrated solid returns over the last few months and may actually be approaching a breakup point.

The Wendys

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Wendys Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Wendys may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wyndham Hotels and Wendys

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

The idea behind Wyndham Hotels Resorts and The Wendys Co 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.