Correlation Between Ryanair Holdings and Bannerman Resources

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

Diversification Opportunities for Ryanair Holdings and Bannerman Resources

-0.59

Correlation Coefficient

Ryanair Holdings  Bannerman Resources

Excellent diversification

The 3 months correlation between Ryanair and Bannerman is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings plc and Bannerman Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bannerman Resources 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 Bannerman Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bannerman Resources has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and Bannerman Resources go up and down completely randomly.

Pair Corralation between Ryanair Holdings and Bannerman Resources

Assuming the 90 days trading horizon Ryanair Holdings plc is expected to generate 0.35 times more return on investment than Bannerman Resources. However, Ryanair Holdings plc is 2.88 times less risky than Bannerman Resources. It trades about 0.07 of its potential returns per unit of risk. Bannerman Resources Limited is currently generating about -0.01 per unit of risk. If you would invest  1,738  in Ryanair Holdings plc on October 23, 2024 and sell it today you would earn a total of  93.00  from holding Ryanair Holdings plc or generate 5.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Ryanair Holdings plc  vs.  Bannerman Resources Limited

Ryanair Holdings plc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Ryanair Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Bannerman Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bannerman Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bannerman Resources is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ryanair Holdings and Bannerman Resources

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

The idea behind Ryanair Holdings plc and Bannerman Resources Limited 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.