Correlation Between Walmart and Wyndham Hotels

Can any of the company-specific risk be diversified away by investing in both Walmart and Wyndham Hotels 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 Walmart and Wyndham Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and Wyndham Hotels Resorts, you can compare the effects of market volatilities on Walmart and Wyndham Hotels 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 Walmart with a short position of Wyndham Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Wyndham Hotels.

Diversification Opportunities for Walmart and Wyndham Hotels

0.9

Correlation Coefficient

Walmart  Wyndham Hotels

Almost no diversification

The 3 months correlation between Walmart and Wyndham is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Wyndham Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wyndham Hotels Resorts and Walmart 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 Walmart are associated (or correlated) with Wyndham Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wyndham Hotels Resorts has no effect on the direction of Walmart i.e., Walmart and Wyndham Hotels go up and down completely randomly.

Pair Corralation between Walmart and Wyndham Hotels

Assuming the 90 days trading horizon Walmart is expected to generate 1.06 times more return on investment than Wyndham Hotels. However, Walmart is 1.06 times more volatile than Wyndham Hotels Resorts. It trades about -0.09 of its potential returns per unit of risk. Wyndham Hotels Resorts is currently generating about -0.14 per unit of risk. If you would invest  8,728  in Walmart on December 24, 2024 and sell it today you would lose (811.00) from holding Walmart or give up 9.29% of portfolio value over 90 days.

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

Walmart  vs.  Wyndham Hotels Resorts

Walmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Walmart and Wyndham Hotels

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

The idea behind Walmart and Wyndham Hotels 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.