Correlation Between Hong Kong and Ryanair Holdings

Can any of the company-specific risk be diversified away by investing in both Hong Kong and Ryanair Holdings 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 Hong Kong and Ryanair Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hong Kong Land and Ryanair Holdings plc, you can compare the effects of market volatilities on Hong Kong and Ryanair Holdings 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 Hong Kong with a short position of Ryanair Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and Ryanair Holdings.

Diversification Opportunities for Hong Kong and Ryanair Holdings

0.0

Correlation Coefficient

Hong Kong  Ryanair Holdings

Pay attention - limited upside

The 3 months correlation between Hong and Ryanair is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Land and Ryanair Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ryanair Holdings plc and Hong Kong 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 Hong Kong Land are associated (or correlated) with Ryanair Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ryanair Holdings plc has no effect on the direction of Hong Kong i.e., Hong Kong and Ryanair Holdings go up and down completely randomly.

Pair Corralation between Hong Kong and Ryanair Holdings

Assuming the 90 days trading horizon Hong Kong is expected to generate 1.32 times less return on investment than Ryanair Holdings. But when comparing it to its historical volatility, Hong Kong Land is 15.55 times less risky than Ryanair Holdings. It trades about 0.08 of its potential returns per unit of risk. Ryanair Holdings plc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  175,400  in Ryanair Holdings plc on December 2, 2024 and sell it today you would lose (4,700) from holding Ryanair Holdings plc or give up 2.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Hong Kong Land  vs.  Ryanair Holdings plc

Hong Kong Land

Risk-Adjusted Performance

Very Weak

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

Ryanair Holdings plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, Ryanair Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hong Kong and Ryanair Holdings

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

The idea behind Hong Kong Land and Ryanair Holdings plc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.