Correlation Between T-MOBILE and Wizz Air

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

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

Diversification Opportunities for T-MOBILE and Wizz Air

0.45

Correlation Coefficient

T-MOBILE  Wizz Air

Very weak diversification

The 3 months correlation between T-MOBILE and Wizz is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding T MOBILE US 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 T-MOBILE 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 T MOBILE US 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 T-MOBILE i.e., T-MOBILE and Wizz Air go up and down completely randomly.

Pair Corralation between T-MOBILE and Wizz Air

Assuming the 90 days trading horizon T MOBILE US is expected to generate 0.39 times more return on investment than Wizz Air. However, T MOBILE US is 2.58 times less risky than Wizz Air. It trades about 0.3 of its potential returns per unit of risk. Wizz Air Holdings is currently generating about 0.03 per unit of risk. If you would invest  17,842  in T MOBILE US on August 31, 2024 and sell it today you would earn a total of  5,608  from holding T MOBILE US or generate 31.43% return on investment over 90 days.

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

T MOBILE US  vs.  Wizz Air Holdings

T MOBILE US

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in T MOBILE US are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, T-MOBILE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Wizz Air Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wizz Air Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Wizz Air is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with T-MOBILE and Wizz Air

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

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.