Correlation Between Ryanair Holdings and Norwegian Cruise

Can any of the company-specific risk be diversified away by investing in both Ryanair Holdings and Norwegian Cruise 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 Norwegian Cruise 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 Norwegian Cruise Line, you can compare the effects of market volatilities on Ryanair Holdings and Norwegian Cruise 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 Norwegian Cruise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ryanair Holdings and Norwegian Cruise.

Diversification Opportunities for Ryanair Holdings and Norwegian Cruise

-0.66

Correlation Coefficient

Ryanair Holdings  Norwegian Cruise

Excellent diversification

The 3 months correlation between Ryanair and Norwegian is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings plc and Norwegian Cruise Line in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Cruise Line 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 Norwegian Cruise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norwegian Cruise Line has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and Norwegian Cruise go up and down completely randomly.

Pair Corralation between Ryanair Holdings and Norwegian Cruise

Assuming the 90 days trading horizon Ryanair Holdings plc is expected to generate 0.3 times more return on investment than Norwegian Cruise. However, Ryanair Holdings plc is 3.33 times less risky than Norwegian Cruise. It trades about 0.01 of its potential returns per unit of risk. Norwegian Cruise Line is currently generating about -0.09 per unit of risk. If you would invest  3,374  in Ryanair Holdings plc on December 26, 2024 and sell it today you would earn a total of  7.00  from holding Ryanair Holdings plc or generate 0.21% return on investment over 90 days.

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

Ryanair Holdings plc  vs.  Norwegian Cruise Line

Ryanair Holdings plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ryanair Holdings plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ryanair Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Norwegian Cruise Line

Risk-Adjusted Performance

Very Weak

Over the last 90 days Norwegian Cruise Line has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ryanair Holdings and Norwegian Cruise

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

The idea behind Ryanair Holdings plc and Norwegian Cruise Line 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.