Correlation Between Wyndham Hotels and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Wyndham Hotels and Southwest Airlines 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 Southwest Airlines 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 Southwest Airlines Co, you can compare the effects of market volatilities on Wyndham Hotels and Southwest Airlines 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 Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wyndham Hotels and Southwest Airlines.
Diversification Opportunities for Wyndham Hotels and Southwest Airlines
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wyndham and Southwest is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines 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 Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Southwest Airlines go up and down completely randomly.
Pair Corralation between Wyndham Hotels and Southwest Airlines
Assuming the 90 days trading horizon Wyndham Hotels Resorts is expected to generate 0.76 times more return on investment than Southwest Airlines. However, Wyndham Hotels Resorts is 1.31 times less risky than Southwest Airlines. It trades about 0.31 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.15 per unit of risk. If you would invest 8,902 in Wyndham Hotels Resorts on August 29, 2024 and sell it today you would earn a total of 915.00 from holding Wyndham Hotels Resorts or generate 10.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wyndham Hotels Resorts vs. Southwest Airlines Co
Performance |
| Timeline |
| Wyndham Hotels Resorts |
| Southwest Airlines |
Wyndham Hotels and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wyndham Hotels and Southwest Airlines
The main advantage of trading using opposite Wyndham Hotels and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wyndham Hotels position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| Wyndham Hotels vs. Lendinvest PLC | Wyndham Hotels vs. Neometals | Wyndham Hotels vs. Coor Service Management | Wyndham Hotels vs. Albion Technology General |
| Southwest Airlines vs. Lendinvest PLC | Southwest Airlines vs. Neometals | Southwest Airlines vs. Coor Service Management | Southwest Airlines vs. Albion Technology General |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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