Correlation Between AIR CHINA and WIZZ AIR

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

By analyzing existing cross correlation between AIR CHINA LTD and WIZZ AIR HLDGUNSPADR4, you can compare the effects of market volatilities on AIR CHINA and WIZZ AIR 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 AIR CHINA with a short position of WIZZ AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR CHINA and WIZZ AIR.

Diversification Opportunities for AIR CHINA and WIZZ AIR

0.49

Correlation Coefficient

AIR CHINA  WIZZ AIR

Very weak diversification

The 3 months correlation between AIR and WIZZ is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding AIR CHINA LTD and WIZZ AIR HLDGUNSPADR4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WIZZ AIR HLDGUNSPADR4 and AIR CHINA 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 AIR CHINA LTD are associated (or correlated) with WIZZ AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WIZZ AIR HLDGUNSPADR4 has no effect on the direction of AIR CHINA i.e., AIR CHINA and WIZZ AIR go up and down completely randomly.

Pair Corralation between AIR CHINA and WIZZ AIR

Assuming the 90 days trading horizon AIR CHINA LTD is expected to generate 0.72 times more return on investment than WIZZ AIR. However, AIR CHINA LTD is 1.38 times less risky than WIZZ AIR. It trades about 0.16 of its potential returns per unit of risk. WIZZ AIR HLDGUNSPADR4 is currently generating about -0.09 per unit of risk. If you would invest  1,010  in AIR CHINA LTD on September 5, 2024 and sell it today you would earn a total of  90.00  from holding AIR CHINA LTD or generate 8.91% return on investment over 90 days.

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

AIR CHINA LTD  vs.  WIZZ AIR HLDGUNSPADR4

AIR CHINA LTD

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIR CHINA LTD are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AIR CHINA reported solid returns over the last few months and may actually be approaching a breakup point.

WIZZ AIR HLDGUNSPADR4

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WIZZ AIR HLDGUNSPADR4 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WIZZ AIR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AIR CHINA and WIZZ AIR

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

The idea behind AIR CHINA LTD and WIZZ AIR HLDGUNSPADR4 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.