Correlation Between SkyWest and Wizz Air
Can any of the company-specific risk be diversified away by investing in both SkyWest 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 SkyWest and Wizz Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SkyWest and Wizz Air Holdings, you can compare the effects of market volatilities on SkyWest 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 SkyWest with a short position of Wizz Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of SkyWest and Wizz Air.
Diversification Opportunities for SkyWest and Wizz Air
Average diversification
The 3 months correlation between SkyWest and Wizz is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest 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 SkyWest 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 SkyWest 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 SkyWest i.e., SkyWest and Wizz Air go up and down completely randomly.
Pair Corralation between SkyWest and Wizz Air
Given the investment horizon of 90 days SkyWest is expected to generate 0.59 times more return on investment than Wizz Air. However, SkyWest is 1.7 times less risky than Wizz Air. It trades about 0.33 of its potential returns per unit of risk. Wizz Air Holdings is currently generating about -0.05 per unit of risk. If you would invest 9,924 in SkyWest on September 3, 2024 and sell it today you would earn a total of 1,550 from holding SkyWest or generate 15.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SkyWest vs. Wizz Air Holdings
Performance |
| Timeline |
| SkyWest |
| Wizz Air Holdings |
SkyWest and Wizz Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SkyWest and Wizz Air
The main advantage of trading using opposite SkyWest and Wizz Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SkyWest 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.| SkyWest vs. Copa Holdings SA | SkyWest vs. Sun Country Airlines | SkyWest vs. Air Transport Services | SkyWest vs. Frontier Group Holdings |
| Wizz Air vs. Copa Holdings SA | Wizz Air vs. United Airlines Holdings | Wizz Air vs. Delta Air Lines | Wizz Air vs. SkyWest |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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