Correlation Between WIZZ AIR and GUDANG GARAM

Can any of the company-specific risk be diversified away by investing in both WIZZ AIR and GUDANG GARAM 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 GUDANG GARAM 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 GUDANG GARAM, you can compare the effects of market volatilities on WIZZ AIR and GUDANG GARAM 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 GUDANG GARAM. Check out your portfolio center. Please also check ongoing floating volatility patterns of WIZZ AIR and GUDANG GARAM.

Diversification Opportunities for WIZZ AIR and GUDANG GARAM

-0.4

Correlation Coefficient

WIZZ AIR  GUDANG GARAM

Very good diversification

The 3 months correlation between WIZZ and GUDANG is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding WIZZ AIR HLDGUNSPADR4 and GUDANG GARAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUDANG GARAM 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 GUDANG GARAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GUDANG GARAM has no effect on the direction of WIZZ AIR i.e., WIZZ AIR and GUDANG GARAM go up and down completely randomly.

Pair Corralation between WIZZ AIR and GUDANG GARAM

Assuming the 90 days trading horizon WIZZ AIR HLDGUNSPADR4 is expected to generate 2.42 times more return on investment than GUDANG GARAM. However, WIZZ AIR is 2.42 times more volatile than GUDANG GARAM. It trades about 0.11 of its potential returns per unit of risk. GUDANG GARAM is currently generating about 0.01 per unit of risk. If you would invest  380.00  in WIZZ AIR HLDGUNSPADR4 on September 25, 2024 and sell it today you would earn a total of  44.00  from holding WIZZ AIR HLDGUNSPADR4 or generate 11.58% 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.  GUDANG GARAM

WIZZ AIR HLDGUNSPADR4

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WIZZ AIR HLDGUNSPADR4 are ranked lower than 3 (%) 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.

GUDANG GARAM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GUDANG GARAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with WIZZ AIR and GUDANG GARAM

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

The idea behind WIZZ AIR HLDGUNSPADR4 and GUDANG GARAM 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.