Correlation Between Wizz Air and Microchip Technology

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

Diversification Opportunities for Wizz Air and Microchip Technology

-0.37

Correlation Coefficient

Wizz Air  Microchip Technology

Very good diversification

The 3 months correlation between Wizz and Microchip is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Wizz Air Holdings and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology 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 Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of Wizz Air i.e., Wizz Air and Microchip Technology go up and down completely randomly.

Pair Corralation between Wizz Air and Microchip Technology

Assuming the 90 days trading horizon Wizz Air Holdings is expected to generate 1.44 times more return on investment than Microchip Technology. However, Wizz Air is 1.44 times more volatile than Microchip Technology. It trades about -0.05 of its potential returns per unit of risk. Microchip Technology is currently generating about -0.07 per unit of risk. If you would invest  218,600  in Wizz Air Holdings on September 18, 2024 and sell it today you would lose (71,200) from holding Wizz Air Holdings or give up 32.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Wizz Air Holdings  vs.  Microchip Technology

Wizz Air Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wizz Air Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Wizz Air unveiled solid returns over the last few months and may actually be approaching a breakup point.

Microchip Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microchip Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Wizz Air and Microchip Technology

The main advantage of trading using opposite Wizz Air and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wizz Air position performs unexpectedly, Microchip Technology 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 Microchip Technology will offset losses from the drop in Microchip Technology's long position.

The idea behind Wizz Air Holdings and Microchip Technology 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.