Correlation Between United Airlines and Ryanair Holdings

Can any of the company-specific risk be diversified away by investing in both United Airlines and Ryanair Holdings 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 United Airlines and Ryanair Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United Airlines Holdings and Ryanair Holdings plc, you can compare the effects of market volatilities on United Airlines and Ryanair Holdings 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 United Airlines with a short position of Ryanair Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Ryanair Holdings.

Diversification Opportunities for United Airlines and Ryanair Holdings

0.51

Correlation Coefficient

United Airlines  Ryanair Holdings

Very weak diversification

The 3 months correlation between United and Ryanair is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Ryanair Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ryanair Holdings plc and United Airlines 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 United Airlines Holdings are associated (or correlated) with Ryanair Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ryanair Holdings plc has no effect on the direction of United Airlines i.e., United Airlines and Ryanair Holdings go up and down completely randomly.

Pair Corralation between United Airlines and Ryanair Holdings

Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 1.64 times more return on investment than Ryanair Holdings. However, United Airlines is 1.64 times more volatile than Ryanair Holdings plc. It trades about 0.27 of its potential returns per unit of risk. Ryanair Holdings plc is currently generating about 0.04 per unit of risk. If you would invest  22,214  in United Airlines Holdings on October 26, 2024 and sell it today you would earn a total of  10,073  from holding United Airlines Holdings or generate 45.35% return on investment over 90 days.

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

United Airlines Holdings  vs.  Ryanair Holdings plc

United Airlines Holdings

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United Airlines sustained solid returns over the last few months and may actually be approaching a breakup point.

Ryanair Holdings plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ryanair Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Airlines and Ryanair Holdings

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

The idea behind United Airlines Holdings and Ryanair Holdings plc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.