Correlation Between Alphabet and Wyndham Hotels

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

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

Diversification Opportunities for Alphabet and Wyndham Hotels

-0.73

Correlation Coefficient

Alphabet  Wyndham Hotels

Pay attention - limited upside

The 3 months correlation between Alphabet and Wyndham is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C 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 Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and Wyndham Hotels go up and down completely randomly.

Pair Corralation between Alphabet and Wyndham Hotels

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.65 times more return on investment than Wyndham Hotels. However, Alphabet Inc Class C is 1.54 times less risky than Wyndham Hotels. It trades about 0.22 of its potential returns per unit of risk. Wyndham Hotels Resorts is currently generating about -0.08 per unit of risk. If you would invest  16,557  in Alphabet Inc Class C on March 2, 2024 and sell it today you would earn a total of  799.00  from holding Alphabet Inc Class C or generate 4.83% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Wyndham Hotels Resorts

Alphabet Class C

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

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 Alphabet and Wyndham Hotels

The main advantage of trading using opposite Alphabet and Wyndham Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.