Correlation Between Ryanair Holdings and China Eastern

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

Diversification Opportunities for Ryanair Holdings and China Eastern

0.68

Correlation Coefficient

Ryanair Holdings  China Eastern

Poor diversification

The 3 months correlation between Ryanair and China is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings plc and China Eastern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Eastern Airlines 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 China Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Eastern Airlines has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and China Eastern go up and down completely randomly.

Pair Corralation between Ryanair Holdings and China Eastern

Assuming the 90 days trading horizon Ryanair Holdings is expected to generate 11.88 times less return on investment than China Eastern. But when comparing it to its historical volatility, Ryanair Holdings plc is 2.35 times less risky than China Eastern. It trades about 0.01 of its potential returns per unit of risk. China Eastern Airlines is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  24.00  in China Eastern Airlines on October 9, 2024 and sell it today you would earn a total of  5.00  from holding China Eastern Airlines or generate 20.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.4%
Values	Daily Returns

Ryanair Holdings plc  vs.  China Eastern Airlines

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. In spite of rather uncertain fundamental indicators, Ryanair Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Eastern Airlines

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Eastern Airlines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Eastern reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ryanair Holdings and China Eastern

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

The idea behind Ryanair Holdings plc and China Eastern Airlines 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.