Correlation Between Ryanair Holdings and AUTO TRADER

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

Diversification Opportunities for Ryanair Holdings and AUTO TRADER

-0.65

Correlation Coefficient

Ryanair Holdings  AUTO TRADER

Excellent diversification

The 3 months correlation between Ryanair and AUTO is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings plc and AUTO TRADER ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUTO TRADER ADR 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 AUTO TRADER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUTO TRADER ADR has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and AUTO TRADER go up and down completely randomly.

Pair Corralation between Ryanair Holdings and AUTO TRADER

Assuming the 90 days trading horizon Ryanair Holdings plc is expected to generate 1.27 times more return on investment than AUTO TRADER. However, Ryanair Holdings is 1.27 times more volatile than AUTO TRADER ADR. It trades about -0.1 of its potential returns per unit of risk. AUTO TRADER ADR is currently generating about -0.35 per unit of risk. If you would invest  1,954  in Ryanair Holdings plc on October 10, 2024 and sell it today you would lose (46.00) from holding Ryanair Holdings plc or give up 2.35% of portfolio value over 90 days.

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

Ryanair Holdings plc  vs.  AUTO TRADER ADR

Ryanair Holdings plc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Ryanair Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

AUTO TRADER ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUTO TRADER ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ryanair Holdings and AUTO TRADER

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

The idea behind Ryanair Holdings plc and AUTO TRADER ADR 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.