Correlation Between Ryanair Holdings and NOVARTIS

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

Diversification Opportunities for Ryanair Holdings and NOVARTIS

0.67

Correlation Coefficient

Ryanair Holdings  NOVARTIS

Poor diversification

The 3 months correlation between Ryanair and NOVARTIS is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings PLC and NOVARTIS CAP P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVARTIS CAP P 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 NOVARTIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOVARTIS CAP P has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and NOVARTIS go up and down completely randomly.

Pair Corralation between Ryanair Holdings and NOVARTIS

Assuming the 90 days horizon Ryanair Holdings is expected to generate 6.15 times less return on investment than NOVARTIS. In addition to that, Ryanair Holdings is 2.19 times more volatile than NOVARTIS CAP P. It trades about 0.0 of its total potential returns per unit of risk. NOVARTIS CAP P is currently generating about 0.04 per unit of volatility. If you would invest  9,082  in NOVARTIS CAP P on October 25, 2024 and sell it today you would earn a total of  162.00  from holding NOVARTIS CAP P or generate 1.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.22%
Values	Daily Returns

Ryanair Holdings PLC  vs.  NOVARTIS CAP P

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.

NOVARTIS CAP P

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NOVARTIS CAP P are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NOVARTIS 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 NOVARTIS

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

The idea behind Ryanair Holdings PLC and NOVARTIS CAP P 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.