Correlation Between Wizz Air and Air New

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

Diversification Opportunities for Wizz Air and Air New

WizzAirDiversified AwayWizzAirDiversified Away100%
0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between Wizz and Air is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Wizz Air Holdings and Air New Zealand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air New Zealand 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 Air New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air New Zealand has no effect on the direction of Wizz Air i.e., Wizz Air and Air New go up and down completely randomly.

Pair Corralation between Wizz Air and Air New

Assuming the 90 days trading horizon Wizz Air Holdings is expected to under-perform the Air New. In addition to that, Wizz Air is 1.9 times more volatile than Air New Zealand. It trades about -0.01 of its total potential returns per unit of risk. Air New Zealand is currently generating about 0.01 per unit of volatility. If you would invest  36.00  in Air New Zealand on November 19, 2024 and sell it today you would lose (1.00) from holding Air New Zealand or give up 2.78% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Wizz Air Holdings  vs.  Air New Zealand

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-5051015
JavaScript chart by amCharts 3.21.15WI2 BZU
       Timeline  
Wizz Air Holdings 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Wizz Air Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Wizz Air unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb14151617181920
Air New Zealand 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Air New exhibited solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.280.290.30.310.320.330.340.35

Wizz Air and Air New Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-12.93-9.68-6.44-3.190.03.226.6210.0113.4116.8 0.010.020.030.040.050.060.07
JavaScript chart by amCharts 3.21.15WI2 BZU
       Returns  

Pair Trading with Wizz Air and Air New

The main advantage of trading using opposite Wizz Air and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wizz Air position performs unexpectedly, Air New 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 Air New will offset losses from the drop in Air New's long position.
The idea behind Wizz Air Holdings and Air New Zealand 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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