Correlation Between Ryanair Holdings and Carsales

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

Diversification Opportunities for Ryanair Holdings and Carsales

0.05

Correlation Coefficient

Ryanair Holdings  Carsales

Significant diversification

The 3 months correlation between Ryanair and Carsales is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings plc and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carsales has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and Carsales go up and down completely randomly.

Pair Corralation between Ryanair Holdings and Carsales

Assuming the 90 days trading horizon Ryanair Holdings plc is expected to generate 0.83 times more return on investment than Carsales. However, Ryanair Holdings plc is 1.21 times less risky than Carsales. It trades about 0.11 of its potential returns per unit of risk. Carsales is currently generating about 0.03 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  161.00  from holding Ryanair Holdings plc or generate 9.26% 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.  Carsales

Ryanair Holdings plc

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Ryanair Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Carsales

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carsales are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Carsales is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ryanair Holdings and Carsales

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

The idea behind Ryanair Holdings plc and Carsales 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.