Correlation Between Air Lease and Ryanair Holdings

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

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

Diversification Opportunities for Air Lease and Ryanair Holdings

0.49

Correlation Coefficient

Air Lease  Ryanair Holdings

Very weak diversification

The 3 months correlation between Air and Ryanair is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease 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 Air Lease 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 Air Lease 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 Air Lease i.e., Air Lease and Ryanair Holdings go up and down completely randomly.

Pair Corralation between Air Lease and Ryanair Holdings

Allowing for the 90-day total investment horizon Air Lease is expected to generate 1.76 times less return on investment than Ryanair Holdings. But when comparing it to its historical volatility, Air Lease is 1.13 times less risky than Ryanair Holdings. It trades about 0.08 of its potential returns per unit of risk. Ryanair Holdings PLC is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,805  in Ryanair Holdings PLC on February 1, 2024 and sell it today you would earn a total of  7,815  from holding Ryanair Holdings PLC or generate 134.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.74%
Values	Daily Returns

Air Lease  vs.  Ryanair Holdings PLC

Air Lease

Risk-Adjusted Performance

13 of 100

Good

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

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 Air Lease and Ryanair Holdings

The main advantage of trading using opposite Air Lease and Ryanair Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Lease 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 Air Lease 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.