Correlation Between American Eagle and Wizz Air
Can any of the company-specific risk be diversified away by investing in both American Eagle 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 Eagle 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 Eagle Outfitters and Wizz Air Holdings, you can compare the effects of market volatilities on American Eagle 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 Eagle with a short position of Wizz Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Wizz Air.
Diversification Opportunities for American Eagle and Wizz Air
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Wizz is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters 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 Eagle 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 Eagle Outfitters 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 Eagle i.e., American Eagle and Wizz Air go up and down completely randomly.
Pair Corralation between American Eagle and Wizz Air
Assuming the 90 days trading horizon American Eagle Outfitters is expected to generate 0.84 times more return on investment than Wizz Air. However, American Eagle Outfitters is 1.19 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 -0.02 per unit of risk. If you would invest 1,420 in American Eagle Outfitters on September 2, 2024 and sell it today you would earn a total of 330.00 from holding American Eagle Outfitters or generate 23.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Wizz Air Holdings
Performance |
| Timeline |
| American Eagle Outfitters |
| Wizz Air Holdings |
American Eagle and Wizz Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Wizz Air
The main advantage of trading using opposite American Eagle and Wizz Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle 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.| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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