Correlation Between Wyndham Hotels and Yamaha
Can any of the company-specific risk be diversified away by investing in both Wyndham Hotels and Yamaha 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 Yamaha 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 Yamaha Motor Co, you can compare the effects of market volatilities on Wyndham Hotels and Yamaha 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 Yamaha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wyndham Hotels and Yamaha.
Diversification Opportunities for Wyndham Hotels and Yamaha
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wyndham and Yamaha is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Yamaha Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha Motor 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 Yamaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha Motor has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Yamaha go up and down completely randomly.
Pair Corralation between Wyndham Hotels and Yamaha
Assuming the 90 days horizon Wyndham Hotels Resorts is expected to generate 1.03 times more return on investment than Yamaha. However, Wyndham Hotels is 1.03 times more volatile than Yamaha Motor Co. It trades about 0.25 of its potential returns per unit of risk. Yamaha Motor Co is currently generating about 0.06 per unit of risk. If you would invest 6,813 in Wyndham Hotels Resorts on August 28, 2024 and sell it today you would earn a total of 2,337 from holding Wyndham Hotels Resorts or generate 34.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wyndham Hotels Resorts vs. Yamaha Motor Co
Performance |
| Timeline |
| Wyndham Hotels Resorts |
| Yamaha Motor |
Wyndham Hotels and Yamaha Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wyndham Hotels and Yamaha
The main advantage of trading using opposite Wyndham Hotels and Yamaha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wyndham Hotels position performs unexpectedly, Yamaha 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 Yamaha will offset losses from the drop in Yamaha's long position.The idea behind Wyndham Hotels Resorts and Yamaha Motor Co 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.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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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