Correlation Between Hilton Worldwide and Wyndham Hotels

Can any of the company-specific risk be diversified away by investing in both Hilton Worldwide 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 Hilton Worldwide and Wyndham Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hilton Worldwide Holdings and Wyndham Hotels Resorts, you can compare the effects of market volatilities on Hilton Worldwide 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 Hilton Worldwide with a short position of Wyndham Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilton Worldwide and Wyndham Hotels.

Diversification Opportunities for Hilton Worldwide and Wyndham Hotels

-0.27

Correlation Coefficient

Hilton Worldwide  Wyndham Hotels

Very good diversification

The 3 months correlation between Hilton and Wyndham is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Worldwide Holdings 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 Hilton Worldwide 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 Hilton Worldwide Holdings 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 Hilton Worldwide i.e., Hilton Worldwide and Wyndham Hotels go up and down completely randomly.

Pair Corralation between Hilton Worldwide and Wyndham Hotels

Considering the 90-day investment horizon Hilton Worldwide Holdings is expected to under-perform the Wyndham Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Hilton Worldwide Holdings is 1.18 times less risky than Wyndham Hotels. The stock trades about -0.23 of its potential returns per unit of risk. The Wyndham Hotels Resorts is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,301  in Wyndham Hotels Resorts on February 5, 2024 and sell it today you would earn a total of  24.00  from holding Wyndham Hotels Resorts or generate 0.33% return on investment over 90 days.

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

Hilton Worldwide Holdings  vs.  Wyndham Hotels Resorts

Hilton Worldwide Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Hilton Worldwide is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Wyndham Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wyndham Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Wyndham Hotels is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Hilton Worldwide and Wyndham Hotels

The main advantage of trading using opposite Hilton Worldwide and Wyndham Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Worldwide 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.

The idea behind Hilton Worldwide Holdings and Wyndham Hotels Resorts 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .