Correlation Between Wyndham Hotels and Studio City

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

Diversification Opportunities for Wyndham Hotels and Studio City

-0.62

Correlation Coefficient

Wyndham Hotels  Studio City

Excellent diversification

The 3 months correlation between Wyndham and Studio is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Studio City International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Studio City International 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 Studio City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Studio City International has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Studio City go up and down completely randomly.

Pair Corralation between Wyndham Hotels and Studio City

Allowing for the 90-day total investment horizon Wyndham Hotels Resorts is expected to generate 0.31 times more return on investment than Studio City. However, Wyndham Hotels Resorts is 3.2 times less risky than Studio City. It trades about -0.03 of its potential returns per unit of risk. Studio City International is currently generating about -0.09 per unit of risk. If you would invest  7,346  in Wyndham Hotels Resorts on February 11, 2024 and sell it today you would lose (109.00) from holding Wyndham Hotels Resorts or give up 1.48% of portfolio value over 90 days.

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

Wyndham Hotels Resorts  vs.  Studio City International

Wyndham Hotels Resorts

Risk-Adjusted Performance

0 of 100

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 unsteady 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.

Studio City International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Studio City International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Studio City exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wyndham Hotels and Studio City

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

The idea behind Wyndham Hotels Resorts and Studio City 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.