Correlation Between WIZZ AIR and Wizz Air

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

Diversification Opportunities for WIZZ AIR and Wizz Air

0.89

Correlation Coefficient

WIZZ AIR  Wizz Air

Very poor diversification

The 3 months correlation between WIZZ and Wizz is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding WIZZ AIR HLDGUNSPADR4 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 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 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 WIZZ AIR i.e., WIZZ AIR and Wizz Air go up and down completely randomly.

Pair Corralation between WIZZ AIR and Wizz Air

Assuming the 90 days trading horizon WIZZ AIR HLDGUNSPADR4 is expected to generate 1.1 times more return on investment than Wizz Air. However, WIZZ AIR is 1.1 times more volatile than Wizz Air Holdings. It trades about -0.05 of its potential returns per unit of risk. Wizz Air Holdings is currently generating about -0.06 per unit of risk. If you would invest  635.00  in WIZZ AIR HLDGUNSPADR4 on September 29, 2024 and sell it today you would lose (207.00) from holding WIZZ AIR HLDGUNSPADR4 or give up 32.6% of portfolio value over 90 days.

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

WIZZ AIR HLDGUNSPADR4  vs.  Wizz Air Holdings

WIZZ AIR HLDGUNSPADR4

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WIZZ AIR HLDGUNSPADR4 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WIZZ AIR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Wizz Air Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wizz Air Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Wizz Air 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 Wizz Air

The main advantage of trading using opposite WIZZ AIR and Wizz Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WIZZ AIR 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 WIZZ AIR HLDGUNSPADR4 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.