Correlation Between Wyndham Hotels and Hilton Worldwide
Can any of the company-specific risk be diversified away by investing in both Wyndham Hotels and Hilton Worldwide 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 Hilton Worldwide 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 Hilton Worldwide Holdings, you can compare the effects of market volatilities on Wyndham Hotels and Hilton Worldwide 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 Hilton Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wyndham Hotels and Hilton Worldwide.
Diversification Opportunities for Wyndham Hotels and Hilton Worldwide
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wyndham and Hilton is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Hilton Worldwide Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Worldwide Holdings 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 Hilton Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Worldwide Holdings has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Hilton Worldwide go up and down completely randomly.
Pair Corralation between Wyndham Hotels and Hilton Worldwide
Allowing for the 90-day total investment horizon Wyndham Hotels Resorts is expected to generate 1.43 times more return on investment than Hilton Worldwide. However, Wyndham Hotels is 1.43 times more volatile than Hilton Worldwide Holdings. It trades about 0.23 of its potential returns per unit of risk. Hilton Worldwide Holdings is currently generating about 0.26 per unit of risk. If you would invest 8,927 in Wyndham Hotels Resorts on August 27, 2024 and sell it today you would earn a total of 742.00 from holding Wyndham Hotels Resorts or generate 8.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wyndham Hotels Resorts vs. Hilton Worldwide Holdings
Performance |
| Timeline |
| Wyndham Hotels Resorts |
| Hilton Worldwide Holdings |
Wyndham Hotels and Hilton Worldwide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wyndham Hotels and Hilton Worldwide
The main advantage of trading using opposite Wyndham Hotels and Hilton Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wyndham Hotels position performs unexpectedly, Hilton Worldwide 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 Hilton Worldwide will offset losses from the drop in Hilton Worldwide's long position.| Wyndham Hotels vs. InterContinental Hotels Group | Wyndham Hotels vs. Hyatt Hotels | Wyndham Hotels vs. Hilton Worldwide Holdings | Wyndham Hotels vs. Marriott International |
| Hilton Worldwide vs. Hyatt Hotels | Hilton Worldwide vs. Wyndham Hotels Resorts | Hilton Worldwide vs. Choice Hotels International | Hilton Worldwide vs. InterContinental Hotels Group |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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