Correlation Between Wyndham Hotels and Direct Line
Can any of the company-specific risk be diversified away by investing in both Wyndham Hotels and Direct Line 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 Direct Line 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 Direct Line Insurance, you can compare the effects of market volatilities on Wyndham Hotels and Direct Line 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 Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wyndham Hotels and Direct Line.
Diversification Opportunities for Wyndham Hotels and Direct Line
-0.93 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Wyndham and Direct is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line Insurance 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 Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Direct Line go up and down completely randomly.
Pair Corralation between Wyndham Hotels and Direct Line
Assuming the 90 days trading horizon Wyndham Hotels Resorts is expected to generate 1.45 times more return on investment than Direct Line. However, Wyndham Hotels is 1.45 times more volatile than Direct Line Insurance. It trades about 0.25 of its potential returns per unit of risk. Direct Line Insurance is currently generating about -0.26 per unit of risk. If you would invest 7,865 in Wyndham Hotels Resorts on August 30, 2024 and sell it today you would earn a total of 1,910 from holding Wyndham Hotels Resorts or generate 24.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wyndham Hotels Resorts vs. Direct Line Insurance
Performance |
| Timeline |
| Wyndham Hotels Resorts |
| Direct Line Insurance |
Wyndham Hotels and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wyndham Hotels and Direct Line
The main advantage of trading using opposite Wyndham Hotels and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wyndham Hotels position performs unexpectedly, Direct Line 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 Direct Line will offset losses from the drop in Direct Line's long position.| Wyndham Hotels vs. Tungsten West PLC | Wyndham Hotels vs. Argo Group Limited | Wyndham Hotels vs. Hardide PLC | Wyndham Hotels vs. Versarien PLC |
| Direct Line vs. Toyota Motor Corp | Direct Line vs. SoftBank Group Corp | Direct Line vs. OTP Bank Nyrt | Direct Line vs. Las Vegas Sands |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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