Correlation Between Wyndham Hotels and Light Wonder
Can any of the company-specific risk be diversified away by investing in both Wyndham Hotels and Light Wonder 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 Light Wonder 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 Light Wonder, you can compare the effects of market volatilities on Wyndham Hotels and Light Wonder 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 Light Wonder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wyndham Hotels and Light Wonder.
Diversification Opportunities for Wyndham Hotels and Light Wonder
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wyndham and Light is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Light Wonder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Light Wonder 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 Light Wonder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Light Wonder has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Light Wonder go up and down completely randomly.
Pair Corralation between Wyndham Hotels and Light Wonder
Allowing for the 90-day total investment horizon Wyndham Hotels is expected to generate 1.34 times less return on investment than Light Wonder. But when comparing it to its historical volatility, Wyndham Hotels Resorts is 1.33 times less risky than Light Wonder. It trades about 0.05 of its potential returns per unit of risk. Light Wonder is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6,394 in Light Wonder on September 5, 2024 and sell it today you would earn a total of 3,491 from holding Light Wonder or generate 54.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wyndham Hotels Resorts vs. Light Wonder
Performance |
| Timeline |
| Wyndham Hotels Resorts |
| Light Wonder |
Wyndham Hotels and Light Wonder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wyndham Hotels and Light Wonder
The main advantage of trading using opposite Wyndham Hotels and Light Wonder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wyndham Hotels position performs unexpectedly, Light Wonder 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 Light Wonder will offset losses from the drop in Light Wonder's long position.| Wyndham Hotels vs. Mondee Holdings | Wyndham Hotels vs. TripAdvisor | Wyndham Hotels vs. Thayer Ventures Acquisition |
| Light Wonder vs. Codere Online Corp | Light Wonder vs. Inspired Entertainment | Light Wonder vs. International Game Technology | Light Wonder vs. Accel 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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