Correlation Between WIZZ AIR and Universal Health

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

Diversification Opportunities for WIZZ AIR and Universal Health

-0.57

Correlation Coefficient

WIZZ AIR  Universal Health

Excellent diversification

The 3 months correlation between WIZZ and Universal is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding WIZZ AIR HLDGUNSPADR4 and Universal Health Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Services 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 Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Services has no effect on the direction of WIZZ AIR i.e., WIZZ AIR and Universal Health go up and down completely randomly.

Pair Corralation between WIZZ AIR and Universal Health

Assuming the 90 days trading horizon WIZZ AIR HLDGUNSPADR4 is expected to generate 2.62 times more return on investment than Universal Health. However, WIZZ AIR is 2.62 times more volatile than Universal Health Services. It trades about 0.35 of its potential returns per unit of risk. Universal Health Services is currently generating about -0.05 per unit of risk. If you would invest  364.00  in WIZZ AIR HLDGUNSPADR4 on December 4, 2024 and sell it today you would earn a total of  132.00  from holding WIZZ AIR HLDGUNSPADR4 or generate 36.26% 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.  Universal Health Services

WIZZ AIR HLDGUNSPADR4

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WIZZ AIR HLDGUNSPADR4 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, WIZZ AIR reported solid returns over the last few months and may actually be approaching a breakup point.

Universal Health Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal Health Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Universal Health 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 Universal Health

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

The idea behind WIZZ AIR HLDGUNSPADR4 and Universal Health 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.