Correlation Between Ryanair Holdings and Volkswagen

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

Diversification Opportunities for Ryanair Holdings and Volkswagen

-0.59

Correlation Coefficient

Ryanair Holdings  Volkswagen

Excellent diversification

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

Pair Corralation between Ryanair Holdings and Volkswagen

Assuming the 90 days trading horizon Ryanair Holdings is expected to generate 43.21 times less return on investment than Volkswagen. But when comparing it to its historical volatility, Ryanair Holdings plc is 1.67 times less risky than Volkswagen. It trades about 0.01 of its potential returns per unit of risk. Volkswagen AG is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  8,280  in Volkswagen AG on October 4, 2024 and sell it today you would earn a total of  695.00  from holding Volkswagen AG or generate 8.39% return on investment over 90 days.

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

Ryanair Holdings plc  vs.  Volkswagen AG

Ryanair Holdings plc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 15 (%) 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.

Volkswagen AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ryanair Holdings and Volkswagen

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

The idea behind Ryanair Holdings plc and Volkswagen AG 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.