Correlation Between Ryanair Holdings and Compania Cervecerias

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

Diversification Opportunities for Ryanair Holdings and Compania Cervecerias

0.73

Correlation Coefficient

Ryanair Holdings  Compania Cervecerias

Poor diversification

The 3 months correlation between Ryanair and Compania is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings PLC and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias 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 Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and Compania Cervecerias go up and down completely randomly.

Pair Corralation between Ryanair Holdings and Compania Cervecerias

Assuming the 90 days horizon Ryanair Holdings is expected to generate 3.57 times less return on investment than Compania Cervecerias. In addition to that, Ryanair Holdings is 1.51 times more volatile than Compania Cervecerias Unidas. It trades about 0.06 of its total potential returns per unit of risk. Compania Cervecerias Unidas is currently generating about 0.34 per unit of volatility. If you would invest  1,167  in Compania Cervecerias Unidas on December 20, 2024 and sell it today you would earn a total of  372.00  from holding Compania Cervecerias Unidas or generate 31.88% 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.  Compania Cervecerias Unidas

Ryanair Holdings PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Ryanair Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Compania Cervecerias

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Compania Cervecerias unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ryanair Holdings and Compania Cervecerias

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

The idea behind Ryanair Holdings PLC and Compania Cervecerias Unidas 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.