Correlation Between Westinghouse Air and Ryanair Holdings

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

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

Diversification Opportunities for Westinghouse Air and Ryanair Holdings

0.31

Correlation Coefficient

Westinghouse Air  Ryanair Holdings

Weak diversification

The 3 months correlation between Westinghouse and Ryanair is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake 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 Westinghouse Air 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 Westinghouse Air Brake 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 Westinghouse Air i.e., Westinghouse Air and Ryanair Holdings go up and down completely randomly.

Pair Corralation between Westinghouse Air and Ryanair Holdings

Considering the 90-day investment horizon Westinghouse Air Brake is expected to generate 0.64 times more return on investment than Ryanair Holdings. However, Westinghouse Air Brake is 1.57 times less risky than Ryanair Holdings. It trades about 0.11 of its potential returns per unit of risk. Ryanair Holdings PLC is currently generating about 0.05 per unit of risk. If you would invest  9,923  in Westinghouse Air Brake on September 19, 2024 and sell it today you would earn a total of  9,104  from holding Westinghouse Air Brake or generate 91.75% return on investment over 90 days.

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

Westinghouse Air Brake  vs.  Ryanair Holdings PLC

Westinghouse Air Brake

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Westinghouse Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Westinghouse Air and Ryanair Holdings

The main advantage of trading using opposite Westinghouse Air and Ryanair Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air 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 Westinghouse Air Brake 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.