Correlation Between Ryanair Holdings and Norsk Hydro

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

Diversification Opportunities for Ryanair Holdings and Norsk Hydro

0.08

Correlation Coefficient

Ryanair Holdings  Norsk Hydro

Significant diversification

The 3 months correlation between Ryanair and Norsk is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings plc and Norsk Hydro ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsk Hydro ASA 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 Norsk Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsk Hydro ASA has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and Norsk Hydro go up and down completely randomly.

Pair Corralation between Ryanair Holdings and Norsk Hydro

Assuming the 90 days trading horizon Ryanair Holdings plc is expected to generate 0.54 times more return on investment than Norsk Hydro. However, Ryanair Holdings plc is 1.84 times less risky than Norsk Hydro. It trades about 0.17 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.01 per unit of risk. If you would invest  1,654  in Ryanair Holdings plc on September 22, 2024 and sell it today you would earn a total of  270.00  from holding Ryanair Holdings plc or generate 16.32% 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.  Norsk Hydro ASA

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 fragile fundamental indicators, Ryanair Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Norsk Hydro ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ryanair Holdings and Norsk Hydro

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

The idea behind Ryanair Holdings plc and Norsk Hydro ASA 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.