Correlation Between ELECTRONIC ARTS and Wyndham Hotels
Can any of the company-specific risk be diversified away by investing in both ELECTRONIC ARTS 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 ELECTRONIC ARTS and Wyndham Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ELECTRONIC ARTS and Wyndham Hotels Resorts, you can compare the effects of market volatilities on ELECTRONIC ARTS 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 ELECTRONIC ARTS with a short position of Wyndham Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELECTRONIC ARTS and Wyndham Hotels.
Diversification Opportunities for ELECTRONIC ARTS and Wyndham Hotels
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ELECTRONIC and Wyndham is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS 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 ELECTRONIC ARTS 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 ELECTRONIC ARTS 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 ELECTRONIC ARTS i.e., ELECTRONIC ARTS and Wyndham Hotels go up and down completely randomly.
Pair Corralation between ELECTRONIC ARTS and Wyndham Hotels
Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to generate 1.42 times less return on investment than Wyndham Hotels. But when comparing it to its historical volatility, ELECTRONIC ARTS is 1.25 times less risky than Wyndham Hotels. It trades about 0.05 of its potential returns per unit of risk. Wyndham Hotels Resorts is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6,817 in Wyndham Hotels Resorts on October 24, 2024 and sell it today you would earn a total of 3,133 from holding Wyndham Hotels Resorts or generate 45.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ELECTRONIC ARTS vs. Wyndham Hotels Resorts
Performance |
| Timeline |
| ELECTRONIC ARTS |
| Wyndham Hotels Resorts |
ELECTRONIC ARTS and Wyndham Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ELECTRONIC ARTS and Wyndham Hotels
The main advantage of trading using opposite ELECTRONIC ARTS and Wyndham Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELECTRONIC ARTS 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.| ELECTRONIC ARTS vs. BioNTech SE | ELECTRONIC ARTS vs. Agilent Technologies | ELECTRONIC ARTS vs. T MOBILE US | ELECTRONIC ARTS vs. Minerals Technologies |
| Wyndham Hotels vs. TT Electronics PLC | Wyndham Hotels vs. ELECTRONIC ARTS | Wyndham Hotels vs. Ultra Clean Holdings | Wyndham Hotels vs. ARROW ELECTRONICS |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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