Correlation Between Wizz Air and Falcon Oil

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

Diversification Opportunities for Wizz Air and Falcon Oil

-0.38

Correlation Coefficient

Wizz Air  Falcon Oil

Very good diversification

The 3 months correlation between Wizz and Falcon is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Wizz Air Holdings and Falcon Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Oil Gas 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 Falcon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Oil Gas has no effect on the direction of Wizz Air i.e., Wizz Air and Falcon Oil go up and down completely randomly.

Pair Corralation between Wizz Air and Falcon Oil

Assuming the 90 days trading horizon Wizz Air Holdings is expected to generate 1.73 times more return on investment than Falcon Oil. However, Wizz Air is 1.73 times more volatile than Falcon Oil Gas. It trades about 0.16 of its potential returns per unit of risk. Falcon Oil Gas is currently generating about -0.22 per unit of risk. If you would invest  129,700  in Wizz Air Holdings on September 23, 2024 and sell it today you would earn a total of  14,600  from holding Wizz Air Holdings or generate 11.26% return on investment over 90 days.

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

Wizz Air Holdings  vs.  Falcon Oil Gas

Wizz Air Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wizz Air Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Wizz Air unveiled solid returns over the last few months and may actually be approaching a breakup point.

Falcon Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady 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 Falcon Oil

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

The idea behind Wizz Air Holdings and Falcon Oil Gas 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.