Correlation Between WIZZ AIR and Discover Financial

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

By analyzing existing cross correlation between WIZZ AIR HLDGUNSPADR4 and Discover Financial Services, you can compare the effects of market volatilities on WIZZ AIR and Discover Financial 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 Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of WIZZ AIR and Discover Financial.

Diversification Opportunities for WIZZ AIR and Discover Financial

-0.42

Correlation Coefficient

WIZZ AIR  Discover Financial

Very good diversification

The 3 months correlation between WIZZ and Discover is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding WIZZ AIR HLDGUNSPADR4 and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial 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 HLDGUNSPADR4 are associated (or correlated) with Discover Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discover Financial has no effect on the direction of WIZZ AIR i.e., WIZZ AIR and Discover Financial go up and down completely randomly.

Pair Corralation between WIZZ AIR and Discover Financial

Assuming the 90 days trading horizon WIZZ AIR HLDGUNSPADR4 is expected to generate 1.83 times more return on investment than Discover Financial. However, WIZZ AIR is 1.83 times more volatile than Discover Financial Services. It trades about 0.07 of its potential returns per unit of risk. Discover Financial Services is currently generating about -0.03 per unit of risk. If you would invest  428.00  in WIZZ AIR HLDGUNSPADR4 on December 27, 2024 and sell it today you would earn a total of  68.00  from holding WIZZ AIR HLDGUNSPADR4 or generate 15.89% return on investment over 90 days.

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

WIZZ AIR HLDGUNSPADR4  vs.  Discover Financial Services

WIZZ AIR HLDGUNSPADR4

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WIZZ AIR HLDGUNSPADR4 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WIZZ AIR reported solid returns over the last few months and may actually be approaching a breakup point.

Discover Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Discover Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Discover Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with WIZZ AIR and Discover Financial

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

The idea behind WIZZ AIR HLDGUNSPADR4 and Discover Financial Services 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.