Correlation Between Wyndham Hotels and Spotify Technology
Can any of the company-specific risk be diversified away by investing in both Wyndham Hotels and Spotify Technology 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 Spotify Technology 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 Spotify Technology SA, you can compare the effects of market volatilities on Wyndham Hotels and Spotify Technology 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 Spotify Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wyndham Hotels and Spotify Technology.
Diversification Opportunities for Wyndham Hotels and Spotify Technology
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wyndham and Spotify is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology 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 Spotify Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spotify Technology has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Spotify Technology go up and down completely randomly.
Pair Corralation between Wyndham Hotels and Spotify Technology
Assuming the 90 days trading horizon Wyndham Hotels is expected to generate 3.16 times less return on investment than Spotify Technology. But when comparing it to its historical volatility, Wyndham Hotels Resorts is 1.48 times less risky than Spotify Technology. It trades about 0.06 of its potential returns per unit of risk. Spotify Technology SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 13,878 in Spotify Technology SA on September 2, 2024 and sell it today you would earn a total of 31,267 from holding Spotify Technology SA or generate 225.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 87.66% |
| Values | Daily Returns |
Wyndham Hotels Resorts vs. Spotify Technology SA
Performance |
| Timeline |
| Wyndham Hotels Resorts |
| Spotify Technology |
Wyndham Hotels and Spotify Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wyndham Hotels and Spotify Technology
The main advantage of trading using opposite Wyndham Hotels and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wyndham Hotels position performs unexpectedly, Spotify Technology 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 Spotify Technology will offset losses from the drop in Spotify Technology's long position.| Wyndham Hotels vs. JD Sports Fashion | Wyndham Hotels vs. Intermediate Capital Group | Wyndham Hotels vs. Centaur Media | Wyndham Hotels vs. Zoom Video Communications |
| Spotify Technology vs. Ecclesiastical Insurance Office | Spotify Technology vs. Associated British Foods | Spotify Technology vs. Wyndham Hotels Resorts | Spotify Technology vs. Host Hotels Resorts |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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