Correlation Between Ryanair Holdings and Allegiant Travel

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

Diversification Opportunities for Ryanair Holdings and Allegiant Travel

0.09

Correlation Coefficient

Ryanair Holdings  Allegiant Travel

Significant diversification

The 3 months correlation between Ryanair and Allegiant is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings PLC and Allegiant Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegiant Travel 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 Allegiant Travel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegiant Travel has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and Allegiant Travel go up and down completely randomly.

Pair Corralation between Ryanair Holdings and Allegiant Travel

Assuming the 90 days horizon Ryanair Holdings PLC is expected to generate 0.64 times more return on investment than Allegiant Travel. However, Ryanair Holdings PLC is 1.57 times less risky than Allegiant Travel. It trades about 0.06 of its potential returns per unit of risk. Allegiant Travel is currently generating about 0.03 per unit of risk. If you would invest  2,801  in Ryanair Holdings PLC on September 20, 2024 and sell it today you would earn a total of  1,648  from holding Ryanair Holdings PLC or generate 58.84% 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.  Allegiant Travel

Ryanair Holdings PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ryanair Holdings PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Ryanair Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Allegiant Travel

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allegiant Travel are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, Allegiant Travel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ryanair Holdings and Allegiant Travel

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

The idea behind Ryanair Holdings PLC and Allegiant Travel 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.