Correlation Between Naked Wines and Ryanair Holdings

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

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

Diversification Opportunities for Naked Wines and Ryanair Holdings

-0.05

Correlation Coefficient

Naked Wines  Ryanair Holdings

Good diversification

The 3 months correlation between Naked and Ryanair is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc 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 Naked Wines 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 Naked Wines plc 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 Naked Wines i.e., Naked Wines and Ryanair Holdings go up and down completely randomly.

Pair Corralation between Naked Wines and Ryanair Holdings

Assuming the 90 days trading horizon Naked Wines is expected to generate 1.77 times less return on investment than Ryanair Holdings. In addition to that, Naked Wines is 1.58 times more volatile than Ryanair Holdings plc. It trades about 0.06 of its total potential returns per unit of risk. Ryanair Holdings plc is currently generating about 0.17 per unit of volatility. If you would invest  139,200  in Ryanair Holdings plc on September 12, 2024 and sell it today you would earn a total of  25,100  from holding Ryanair Holdings plc or generate 18.03% return on investment over 90 days.

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

Naked Wines plc  vs.  Ryanair Holdings plc

Naked Wines plc

Risk-Adjusted Performance

4 of 100

Weak

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

Ryanair Holdings plc

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Ryanair Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Naked Wines and Ryanair Holdings

The main advantage of trading using opposite Naked Wines and Ryanair Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines 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 Naked Wines plc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.