Correlation Between Ryanair Holdings and CarsalesCom

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

Diversification Opportunities for Ryanair Holdings and CarsalesCom

0.27

Correlation Coefficient

Ryanair Holdings  CarsalesCom

Modest diversification

The 3 months correlation between Ryanair and CarsalesCom is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings PLC and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR 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 CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and CarsalesCom go up and down completely randomly.

Pair Corralation between Ryanair Holdings and CarsalesCom

Assuming the 90 days horizon Ryanair Holdings PLC is expected to generate 0.46 times more return on investment than CarsalesCom. However, Ryanair Holdings PLC is 2.15 times less risky than CarsalesCom. It trades about -0.2 of its potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about -0.22 per unit of risk. If you would invest  4,600  in Ryanair Holdings PLC on October 12, 2024 and sell it today you would lose (304.00) from holding Ryanair Holdings PLC or give up 6.61% of portfolio value over 90 days.

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

Ryanair Holdings PLC  vs.  CarsalesCom Ltd ADR

Ryanair Holdings PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

CarsalesCom ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ryanair Holdings and CarsalesCom

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

The idea behind Ryanair Holdings PLC and CarsalesCom Ltd ADR 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.