Correlation Between Ryanair Holdings and Amazon

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

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

Diversification Opportunities for Ryanair Holdings and Amazon

0.9

Correlation Coefficient

Ryanair Holdings  Amazon

Almost no diversification

The 3 months correlation between Ryanair and Amazon is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings plc and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Ryanair Holdings 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 Ryanair Holdings plc are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and Amazon go up and down completely randomly.

Pair Corralation between Ryanair Holdings and Amazon

Assuming the 90 days trading horizon Ryanair Holdings plc is expected to under-perform the Amazon. But the stock apears to be less risky and, when comparing its historical volatility, Ryanair Holdings plc is 1.48 times less risky than Amazon. The stock trades about -0.02 of its potential returns per unit of risk. The Amazon Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,468  in Amazon Inc on October 4, 2024 and sell it today you would earn a total of  302.00  from holding Amazon Inc or generate 4.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.0%
Values	Daily Returns

Ryanair Holdings plc  vs.  Amazon Inc

Ryanair Holdings plc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ryanair Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Amazon Inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amazon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ryanair Holdings and Amazon

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

The idea behind Ryanair Holdings plc and Amazon Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.