Correlation Between Southwest Airlines and Wyndham Hotels
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines 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 Southwest Airlines and Wyndham Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines Co and Wyndham Hotels Resorts, you can compare the effects of market volatilities on Southwest Airlines 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 Southwest Airlines with a short position of Wyndham Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Wyndham Hotels.
Diversification Opportunities for Southwest Airlines and Wyndham Hotels
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southwest and Wyndham is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co 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 Southwest Airlines 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 Southwest Airlines Co 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 Southwest Airlines i.e., Southwest Airlines and Wyndham Hotels go up and down completely randomly.
Pair Corralation between Southwest Airlines and Wyndham Hotels
Assuming the 90 days trading horizon Southwest Airlines Co is expected to under-perform the Wyndham Hotels. In addition to that, Southwest Airlines is 1.87 times more volatile than Wyndham Hotels Resorts. It trades about -0.27 of its total potential returns per unit of risk. Wyndham Hotels Resorts is currently generating about 0.21 per unit of volatility. If you would invest 10,119 in Wyndham Hotels Resorts on November 7, 2024 and sell it today you would earn a total of 407.00 from holding Wyndham Hotels Resorts or generate 4.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. Wyndham Hotels Resorts
Performance |
| Timeline |
| Southwest Airlines |
| Wyndham Hotels Resorts |
Southwest Airlines and Wyndham Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Wyndham Hotels
The main advantage of trading using opposite Southwest Airlines and Wyndham Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines 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.| Southwest Airlines vs. Chrysalis Investments | Southwest Airlines vs. Sovereign Metals | Southwest Airlines vs. Herald Investment Trust | Southwest Airlines vs. Wheaton Precious Metals |
| Wyndham Hotels vs. Europa Metals | Wyndham Hotels vs. European Metals Holdings | Wyndham Hotels vs. United Utilities Group | Wyndham Hotels vs. URU Metals |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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