Correlation Between American Airlines and Wizz Air
Can any of the company-specific risk be diversified away by investing in both American Airlines 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 American Airlines and Wizz Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Airlines Group and Wizz Air Holdings, you can compare the effects of market volatilities on American Airlines 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 American Airlines with a short position of Wizz Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Wizz Air.
Diversification Opportunities for American Airlines and Wizz Air
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Wizz is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group 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 American Airlines 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 American Airlines Group 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 American Airlines i.e., American Airlines and Wizz Air go up and down completely randomly.
Pair Corralation between American Airlines and Wizz Air
Assuming the 90 days horizon American Airlines Group is expected to generate 0.73 times more return on investment than Wizz Air. However, American Airlines Group is 1.37 times less risky than Wizz Air. It trades about 0.01 of its potential returns per unit of risk. Wizz Air Holdings is currently generating about -0.01 per unit of risk. If you would invest 1,343 in American Airlines Group on August 27, 2024 and sell it today you would earn a total of 3.00 from holding American Airlines Group or generate 0.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Wizz Air Holdings
Performance |
| Timeline |
| American Airlines |
| Wizz Air Holdings |
American Airlines and Wizz Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Wizz Air
The main advantage of trading using opposite American Airlines and Wizz Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines 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 American Airlines Group 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.Check out your portfolio center.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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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