Correlation Between Ryanair Holdings and STMicroelectronics

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

Diversification Opportunities for Ryanair Holdings and STMicroelectronics

0.04

Correlation Coefficient

Ryanair Holdings  STMicroelectronics

Significant diversification

The 3 months correlation between Ryanair and STMicroelectronics is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings plc and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and STMicroelectronics go up and down completely randomly.

Pair Corralation between Ryanair Holdings and STMicroelectronics

Assuming the 90 days trading horizon Ryanair Holdings plc is expected to under-perform the STMicroelectronics. In addition to that, Ryanair Holdings is 2.29 times more volatile than STMicroelectronics NV. It trades about -0.1 of its total potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.17 per unit of volatility. If you would invest  15,150  in STMicroelectronics NV on October 23, 2024 and sell it today you would earn a total of  389.00  from holding STMicroelectronics NV or generate 2.57% return on investment over 90 days.

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

Ryanair Holdings plc  vs.  STMicroelectronics NV

Ryanair Holdings plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

STMicroelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ryanair Holdings and STMicroelectronics

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

The idea behind Ryanair Holdings plc and STMicroelectronics NV 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.