Correlation Between ABB and Wizz Air
Can any of the company-specific risk be diversified away by investing in both ABB 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 ABB and Wizz Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABB and Wizz Air Holdings, you can compare the effects of market volatilities on ABB 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 ABB with a short position of Wizz Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABB and Wizz Air.
Diversification Opportunities for ABB and Wizz Air
Very weak diversification
The 3 months correlation between ABB and Wizz is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding ABB 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 ABB 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 ABB 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 ABB i.e., ABB and Wizz Air go up and down completely randomly.
Pair Corralation between ABB and Wizz Air
Assuming the 90 days trading horizon ABB is expected to generate 0.58 times more return on investment than Wizz Air. However, ABB is 1.73 times less risky than Wizz Air. It trades about 0.03 of its potential returns per unit of risk. Wizz Air Holdings is currently generating about -0.1 per unit of risk. If you would invest 5,000 in ABB on September 1, 2024 and sell it today you would earn a total of 250.00 from holding ABB or generate 5.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABB vs. Wizz Air Holdings
Performance |
| Timeline |
| ABB |
| Wizz Air Holdings |
ABB and Wizz Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABB and Wizz Air
The main advantage of trading using opposite ABB and Wizz Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABB 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 ABB 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.| Wizz Air vs. AUSTEVOLL SEAFOOD | Wizz Air vs. Penta Ocean Construction Co | Wizz Air vs. TYSON FOODS A | Wizz Air vs. Lifeway Foods |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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