Correlation Between Wyndham Hotels and Wingstop

Can any of the company-specific risk be diversified away by investing in both Wyndham Hotels and Wingstop 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 Wingstop 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 Wingstop, you can compare the effects of market volatilities on Wyndham Hotels and Wingstop 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 Wingstop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wyndham Hotels and Wingstop.

Diversification Opportunities for Wyndham Hotels and Wingstop

-0.82

Correlation Coefficient

Wyndham Hotels  Wingstop

Pay attention - limited upside

The 3 months correlation between Wyndham and Wingstop is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Wingstop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wingstop 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 Wingstop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wingstop has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Wingstop go up and down completely randomly.

Pair Corralation between Wyndham Hotels and Wingstop

Allowing for the 90-day total investment horizon Wyndham Hotels is expected to generate 1.75 times less return on investment than Wingstop. But when comparing it to its historical volatility, Wyndham Hotels Resorts is 1.53 times less risky than Wingstop. It trades about 0.06 of its potential returns per unit of risk. Wingstop is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  14,645  in Wingstop on October 1, 2024 and sell it today you would earn a total of  13,892  from holding Wingstop or generate 94.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Wyndham Hotels Resorts  vs.  Wingstop

Wyndham Hotels Resorts

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical indicators, Wyndham Hotels demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Wingstop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wingstop has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Wyndham Hotels and Wingstop

The main advantage of trading using opposite Wyndham Hotels and Wingstop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wyndham Hotels position performs unexpectedly, Wingstop 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 Wingstop will offset losses from the drop in Wingstop's long position.

The idea behind Wyndham Hotels Resorts and Wingstop pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.