Correlation Between National Beverage and Wizz Air

Can any of the company-specific risk be diversified away by investing in both National Beverage 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 National Beverage and Wizz Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Beverage Corp and Wizz Air Holdings, you can compare the effects of market volatilities on National Beverage 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 National Beverage with a short position of Wizz Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Wizz Air.

Diversification Opportunities for National Beverage and Wizz Air

0.2

Correlation Coefficient

National Beverage  Wizz Air

Modest diversification

The 3 months correlation between National and Wizz is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp 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 National Beverage 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 National Beverage Corp 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 National Beverage i.e., National Beverage and Wizz Air go up and down completely randomly.

Pair Corralation between National Beverage and Wizz Air

Assuming the 90 days trading horizon National Beverage Corp is expected to under-perform the Wizz Air. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.88 times less risky than Wizz Air. The stock trades about -0.12 of its potential returns per unit of risk. The Wizz Air Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  129,700  in Wizz Air Holdings on September 23, 2024 and sell it today you would earn a total of  14,600  from holding Wizz Air Holdings or generate 11.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

National Beverage Corp  vs.  Wizz Air Holdings

National Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, National Beverage is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Wizz Air Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wizz Air Holdings are ranked lower than 4 (%) 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.

Pair Trading with National Beverage and Wizz Air

The main advantage of trading using opposite National Beverage and Wizz Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage 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.

The idea behind National Beverage Corp and Wizz Air Holdings 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.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.