Correlation Between Ryanair Holdings and Sumitomo Mitsui

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

Diversification Opportunities for Ryanair Holdings and Sumitomo Mitsui

0.85

Correlation Coefficient

Ryanair Holdings  Sumitomo Mitsui

Very poor diversification

The 3 months correlation between Ryanair and Sumitomo is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings plc and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial 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 Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Financial has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Ryanair Holdings and Sumitomo Mitsui

Assuming the 90 days trading horizon Ryanair Holdings is expected to generate 2.32 times less return on investment than Sumitomo Mitsui. But when comparing it to its historical volatility, Ryanair Holdings plc is 1.23 times less risky than Sumitomo Mitsui. It trades about 0.05 of its potential returns per unit of risk. Sumitomo Mitsui Financial is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,427  in Sumitomo Mitsui Financial on October 10, 2024 and sell it today you would earn a total of  4,497  from holding Sumitomo Mitsui Financial or generate 101.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	76.94%
Values	Daily Returns

Ryanair Holdings plc  vs.  Sumitomo Mitsui Financial

Ryanair Holdings plc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 10 (%) 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.

Sumitomo Mitsui Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Sumitomo Mitsui sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ryanair Holdings and Sumitomo Mitsui

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

The idea behind Ryanair Holdings plc and Sumitomo Mitsui Financial 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.