Correlation Between Ryanair Holdings and Hanover Insurance

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

Diversification Opportunities for Ryanair Holdings and Hanover Insurance

0.6

Correlation Coefficient

Ryanair Holdings  Hanover Insurance

Poor diversification

The 3 months correlation between Ryanair and Hanover is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings plc and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance 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 Hanover Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Insurance has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and Hanover Insurance go up and down completely randomly.

Pair Corralation between Ryanair Holdings and Hanover Insurance

Assuming the 90 days trading horizon Ryanair Holdings is expected to generate 1.72 times less return on investment than Hanover Insurance. In addition to that, Ryanair Holdings is 1.05 times more volatile than The Hanover Insurance. It trades about 0.05 of its total potential returns per unit of risk. The Hanover Insurance is currently generating about 0.08 per unit of volatility. If you would invest  14,523  in The Hanover Insurance on December 30, 2024 and sell it today you would earn a total of  1,477  from holding The Hanover Insurance or generate 10.17% return on investment over 90 days.

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

Ryanair Holdings plc  vs.  The Hanover Insurance

Ryanair Holdings plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ryanair Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Hanover Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Hanover Insurance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ryanair Holdings and Hanover Insurance

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

The idea behind Ryanair Holdings plc and The Hanover Insurance 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.