Correlation Between Wizz Air and Silicon Motion

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

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

Diversification Opportunities for Wizz Air and Silicon Motion

0.07

Correlation Coefficient

Wizz Air  Silicon Motion

Significant diversification

The 3 months correlation between Wizz and Silicon is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Wizz Air Holdings and Silicon Motion Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Motion Technology and Wizz Air 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 Wizz Air Holdings are associated (or correlated) with Silicon Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Motion Technology has no effect on the direction of Wizz Air i.e., Wizz Air and Silicon Motion go up and down completely randomly.

Pair Corralation between Wizz Air and Silicon Motion

Assuming the 90 days trading horizon Wizz Air Holdings is expected to generate 1.24 times more return on investment than Silicon Motion. However, Wizz Air is 1.24 times more volatile than Silicon Motion Technology. It trades about 0.09 of its potential returns per unit of risk. Silicon Motion Technology is currently generating about -0.03 per unit of risk. If you would invest  1,634  in Wizz Air Holdings on September 24, 2024 and sell it today you would earn a total of  90.00  from holding Wizz Air Holdings or generate 5.51% return on investment over 90 days.

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

Wizz Air Holdings  vs.  Silicon Motion Technology

Wizz Air Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wizz Air Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Wizz Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Silicon Motion Technology

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Wizz Air and Silicon Motion

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

The idea behind Wizz Air Holdings and Silicon Motion Technology 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.