Correlation Between Johnson Matthey and Ryanair Holdings

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

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

Diversification Opportunities for Johnson Matthey and Ryanair Holdings

0.76

Correlation Coefficient

Johnson Matthey  Ryanair Holdings

Poor diversification

The 3 months correlation between Johnson and Ryanair is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Matthey Plc 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 Johnson Matthey 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 Johnson Matthey Plc 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 Johnson Matthey i.e., Johnson Matthey and Ryanair Holdings go up and down completely randomly.

Pair Corralation between Johnson Matthey and Ryanair Holdings

Assuming the 90 days trading horizon Johnson Matthey is expected to generate 2.63 times less return on investment than Ryanair Holdings. But when comparing it to its historical volatility, Johnson Matthey Plc is 1.32 times less risky than Ryanair Holdings. It trades about 0.05 of its potential returns per unit of risk. Ryanair Holdings plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,885  in Ryanair Holdings plc on December 25, 2024 and sell it today you would earn a total of  205.00  from holding Ryanair Holdings plc or generate 10.88% return on investment over 90 days.

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

Johnson Matthey Plc  vs.  Ryanair Holdings plc

Johnson Matthey Plc

Risk-Adjusted Performance

Insignificant

Over the last 90 days Johnson Matthey Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Johnson Matthey is not utilizing all of its potentials. The current 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 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Ryanair Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Johnson Matthey and Ryanair Holdings

The main advantage of trading using opposite Johnson Matthey and Ryanair Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Matthey 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 Johnson Matthey Plc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.