Correlation Between OBSERVE MEDICAL and Wizz Air

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

By analyzing existing cross correlation between OBSERVE MEDICAL ASA and Wizz Air Holdings, you can compare the effects of market volatilities on OBSERVE MEDICAL 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 OBSERVE MEDICAL with a short position of Wizz Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of OBSERVE MEDICAL and Wizz Air.

Diversification Opportunities for OBSERVE MEDICAL and Wizz Air

-0.1

Correlation Coefficient

OBSERVE MEDICAL  Wizz Air

Good diversification

The 3 months correlation between OBSERVE and Wizz is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding OBSERVE MEDICAL ASA and Wizz Air Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wizz Air Holdings and OBSERVE MEDICAL 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 OBSERVE MEDICAL ASA 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 Holdings has no effect on the direction of OBSERVE MEDICAL i.e., OBSERVE MEDICAL and Wizz Air go up and down completely randomly.

Pair Corralation between OBSERVE MEDICAL and Wizz Air

Assuming the 90 days trading horizon OBSERVE MEDICAL ASA is expected to generate 10.4 times more return on investment than Wizz Air. However, OBSERVE MEDICAL is 10.4 times more volatile than Wizz Air Holdings. It trades about 0.07 of its potential returns per unit of risk. Wizz Air Holdings is currently generating about -0.01 per unit of risk. If you would invest  21.00  in OBSERVE MEDICAL ASA on September 26, 2024 and sell it today you would lose (18.04) from holding OBSERVE MEDICAL ASA or give up 85.9% of portfolio value over 90 days.

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

OBSERVE MEDICAL ASA  vs.  Wizz Air Holdings

OBSERVE MEDICAL ASA

Risk-Adjusted Performance

2 of 100

Weak

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

Wizz Air Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wizz Air Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively 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 OBSERVE MEDICAL and Wizz Air

The main advantage of trading using opposite OBSERVE MEDICAL and Wizz Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OBSERVE MEDICAL 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 OBSERVE MEDICAL ASA and Wizz Air Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.