Correlation Between Sunstone Hotel and Wyndham Hotels
Can any of the company-specific risk be diversified away by investing in both Sunstone Hotel 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 Sunstone Hotel and Wyndham Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sunstone Hotel Investors and Wyndham Hotels Resorts, you can compare the effects of market volatilities on Sunstone Hotel 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 Sunstone Hotel with a short position of Wyndham Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and Wyndham Hotels.
Diversification Opportunities for Sunstone Hotel and Wyndham Hotels
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sunstone and Wyndham is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors 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 Sunstone Hotel 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 Sunstone Hotel Investors 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 Sunstone Hotel i.e., Sunstone Hotel and Wyndham Hotels go up and down completely randomly.
Pair Corralation between Sunstone Hotel and Wyndham Hotels
Assuming the 90 days horizon Sunstone Hotel is expected to generate 1.57 times less return on investment than Wyndham Hotels. In addition to that, Sunstone Hotel is 1.02 times more volatile than Wyndham Hotels Resorts. It trades about 0.12 of its total potential returns per unit of risk. Wyndham Hotels Resorts is currently generating about 0.18 per unit of volatility. If you would invest 8,300 in Wyndham Hotels Resorts on August 26, 2024 and sell it today you would earn a total of 650.00 from holding Wyndham Hotels Resorts or generate 7.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunstone Hotel Investors vs. Wyndham Hotels Resorts
Performance |
| Timeline |
| Sunstone Hotel Investors |
| Wyndham Hotels Resorts |
Sunstone Hotel and Wyndham Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunstone Hotel and Wyndham Hotels
The main advantage of trading using opposite Sunstone Hotel and Wyndham Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunstone Hotel 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.| Sunstone Hotel vs. SALESFORCE INC CDR | Sunstone Hotel vs. VIVA WINE GROUP | Sunstone Hotel vs. The Trade Desk | Sunstone Hotel vs. Auto Trader Group |
| Wyndham Hotels vs. Transport International Holdings | Wyndham Hotels vs. MELIA HOTELS | Wyndham Hotels vs. InterContinental Hotels Group | Wyndham Hotels vs. PARKEN Sport Entertainment |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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