Correlation Between Wizz Air and Wise Plc

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

Diversification Opportunities for Wizz Air and Wise Plc

0.22

Correlation Coefficient

Wizz Air  Wise Plc

Modest diversification

The 3 months correlation between Wizz and Wise is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Wizz Air Holdings and Wise plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wise plc 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 Wise Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wise plc has no effect on the direction of Wizz Air i.e., Wizz Air and Wise Plc go up and down completely randomly.

Pair Corralation between Wizz Air and Wise Plc

Assuming the 90 days trading horizon Wizz Air is expected to generate 5.4 times less return on investment than Wise Plc. In addition to that, Wizz Air is 1.68 times more volatile than Wise plc. It trades about 0.03 of its total potential returns per unit of risk. Wise plc is currently generating about 0.28 per unit of volatility. If you would invest  75,200  in Wise plc on October 23, 2024 and sell it today you would earn a total of  27,300  from holding Wise plc or generate 36.3% return on investment over 90 days.

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

Wizz Air Holdings  vs.  Wise plc

Wizz Air Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wizz Air Holdings are ranked lower than 2 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Wise plc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wise plc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Wise Plc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wizz Air and Wise Plc

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

The idea behind Wizz Air Holdings and Wise plc 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.