Correlation Between RYANAIR HLDGS and AIR CHINA

Can any of the company-specific risk be diversified away by investing in both RYANAIR HLDGS and AIR CHINA 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 HLDGS and AIR CHINA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RYANAIR HLDGS ADR and AIR CHINA LTD, you can compare the effects of market volatilities on RYANAIR HLDGS and AIR CHINA 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 HLDGS with a short position of AIR CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of RYANAIR HLDGS and AIR CHINA.

Diversification Opportunities for RYANAIR HLDGS and AIR CHINA

0.75

Correlation Coefficient

RYANAIR HLDGS  AIR CHINA

Poor diversification

The 3 months correlation between RYANAIR and AIR is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding RYANAIR HLDGS ADR and AIR CHINA LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR CHINA LTD and RYANAIR HLDGS 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 HLDGS ADR are associated (or correlated) with AIR CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR CHINA LTD has no effect on the direction of RYANAIR HLDGS i.e., RYANAIR HLDGS and AIR CHINA go up and down completely randomly.

Pair Corralation between RYANAIR HLDGS and AIR CHINA

Assuming the 90 days trading horizon RYANAIR HLDGS ADR is expected to generate 0.83 times more return on investment than AIR CHINA. However, RYANAIR HLDGS ADR is 1.2 times less risky than AIR CHINA. It trades about 0.2 of its potential returns per unit of risk. AIR CHINA LTD is currently generating about 0.1 per unit of risk. If you would invest  4,000  in RYANAIR HLDGS ADR on April 25, 2025 and sell it today you would earn a total of  1,050  from holding RYANAIR HLDGS ADR or generate 26.25% return on investment over 90 days.

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

RYANAIR HLDGS ADR  vs.  AIR CHINA LTD

RYANAIR HLDGS ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RYANAIR HLDGS ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, RYANAIR HLDGS reported solid returns over the last few months and may actually be approaching a breakup point.

AIR CHINA LTD

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AIR CHINA LTD are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AIR CHINA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RYANAIR HLDGS and AIR CHINA

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

The idea behind RYANAIR HLDGS ADR and AIR CHINA LTD 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.