Correlation Between Wizz Air and Lithia Motors
Can any of the company-specific risk be diversified away by investing in both Wizz Air and Lithia Motors 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 Lithia Motors 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 Lithia Motors, you can compare the effects of market volatilities on Wizz Air and Lithia Motors 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 Lithia Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wizz Air and Lithia Motors.
Diversification Opportunities for Wizz Air and Lithia Motors
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wizz and Lithia is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Wizz Air Holdings and Lithia Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithia Motors 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 Lithia Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithia Motors has no effect on the direction of Wizz Air i.e., Wizz Air and Lithia Motors go up and down completely randomly.
Pair Corralation between Wizz Air and Lithia Motors
Assuming the 90 days trading horizon Wizz Air Holdings is expected to under-perform the Lithia Motors. In addition to that, Wizz Air is 1.4 times more volatile than Lithia Motors. It trades about -0.02 of its total potential returns per unit of risk. Lithia Motors is currently generating about 0.06 per unit of volatility. If you would invest 20,355 in Lithia Motors on September 3, 2024 and sell it today you would earn a total of 16,245 from holding Lithia Motors or generate 79.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wizz Air Holdings vs. Lithia Motors
Performance |
| Timeline |
| Wizz Air Holdings |
| Lithia Motors |
Wizz Air and Lithia Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wizz Air and Lithia Motors
The main advantage of trading using opposite Wizz Air and Lithia Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wizz Air position performs unexpectedly, Lithia Motors 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 Lithia Motors will offset losses from the drop in Lithia Motors' long position.The idea behind Wizz Air Holdings and Lithia Motors 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.| Lithia Motors vs. GRUPO CARSO A1 | Lithia Motors vs. Commercial Vehicle Group | Lithia Motors vs. Motorcar Parts of | Lithia Motors vs. Wizz Air Holdings |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Stocks Directory Find actively traded stocks across global markets | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Transaction History View history of all your transactions and understand their impact on performance |