Correlation Between Ryanair Holdings and Bank of Ireland

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

Diversification Opportunities for Ryanair Holdings and Bank of Ireland

0.77

Correlation Coefficient

Ryanair Holdings  Bank of Ireland

Poor diversification

The 3 months correlation between Ryanair and Bank is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings plc and Bank of Ireland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Ireland 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 Bank of Ireland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Ireland has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and Bank of Ireland go up and down completely randomly.

Pair Corralation between Ryanair Holdings and Bank of Ireland

Assuming the 90 days trading horizon Ryanair Holdings is expected to generate 2.41 times less return on investment than Bank of Ireland. But when comparing it to its historical volatility, Ryanair Holdings plc is 1.21 times less risky than Bank of Ireland. It trades about 0.14 of its potential returns per unit of risk. Bank of Ireland is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  828.00  in Bank of Ireland on November 28, 2024 and sell it today you would earn a total of  282.00  from holding Bank of Ireland or generate 34.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Ryanair Holdings plc  vs.  Bank of Ireland

Ryanair Holdings plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ryanair Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Bank of Ireland

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Ireland are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Bank of Ireland reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ryanair Holdings and Bank of Ireland

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

The idea behind Ryanair Holdings plc and Bank of Ireland 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.