Correlation Between Direct Line and Wyndham Hotels
Can any of the company-specific risk be diversified away by investing in both Direct Line 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 Direct Line and Wyndham Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direct Line Insurance and Wyndham Hotels Resorts, you can compare the effects of market volatilities on Direct Line 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 Direct Line with a short position of Wyndham Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Wyndham Hotels.
Diversification Opportunities for Direct Line and Wyndham Hotels
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direct and Wyndham is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance 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 Direct Line 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 Direct Line Insurance 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 Direct Line i.e., Direct Line and Wyndham Hotels go up and down completely randomly.
Pair Corralation between Direct Line and Wyndham Hotels
Assuming the 90 days trading horizon Direct Line Insurance is expected to generate 6.58 times more return on investment than Wyndham Hotels. However, Direct Line is 6.58 times more volatile than Wyndham Hotels Resorts. It trades about 0.22 of its potential returns per unit of risk. Wyndham Hotels Resorts is currently generating about 0.35 per unit of risk. If you would invest 16,460 in Direct Line Insurance on September 2, 2024 and sell it today you would earn a total of 7,020 from holding Direct Line Insurance or generate 42.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direct Line Insurance vs. Wyndham Hotels Resorts
Performance |
| Timeline |
| Direct Line Insurance |
| Wyndham Hotels Resorts |
Direct Line and Wyndham Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Wyndham Hotels
The main advantage of trading using opposite Direct Line and Wyndham Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line 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.| Direct Line vs. Gaztransport et Technigaz | Direct Line vs. International Biotechnology Trust | Direct Line vs. DXC Technology Co | Direct Line vs. Spotify Technology SA |
| Wyndham Hotels vs. JD Sports Fashion | Wyndham Hotels vs. Intermediate Capital Group | Wyndham Hotels vs. Centaur Media | Wyndham Hotels vs. Zoom Video Communications |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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