Correlation Between BYD and Wyndham Hotels
Can any of the company-specific risk be diversified away by investing in both BYD 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 BYD and Wyndham Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD Co and Wyndham Hotels Resorts, you can compare the effects of market volatilities on BYD 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 BYD with a short position of Wyndham Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD and Wyndham Hotels.
Diversification Opportunities for BYD and Wyndham Hotels
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between BYD and Wyndham is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding BYD 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 BYD 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 BYD 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 BYD i.e., BYD and Wyndham Hotels go up and down completely randomly.
Pair Corralation between BYD and Wyndham Hotels
Assuming the 90 days trading horizon BYD Co is expected to generate 8.15 times more return on investment than Wyndham Hotels. However, BYD is 8.15 times more volatile than Wyndham Hotels Resorts. It trades about 0.07 of its potential returns per unit of risk. Wyndham Hotels Resorts is currently generating about 0.16 per unit of risk. If you would invest 2,756 in BYD Co on October 13, 2024 and sell it today you would earn a total of 804.00 from holding BYD Co or generate 29.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.32% |
| Values | Daily Returns |
BYD Co vs. Wyndham Hotels Resorts
Performance |
| Timeline |
| BYD Co |
| Wyndham Hotels Resorts |
BYD and Wyndham Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD and Wyndham Hotels
The main advantage of trading using opposite BYD and Wyndham Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD 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 BYD Co 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.| Wyndham Hotels vs. Walmart | Wyndham Hotels vs. BYD Co | Wyndham Hotels vs. Volkswagen AG | Wyndham Hotels vs. Volkswagen AG Non Vtg |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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