Correlation Between Ryanair Holdings and Air Lease

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

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

Diversification Opportunities for Ryanair Holdings and Air Lease

0.49

Correlation Coefficient

Ryanair Holdings  Air Lease

Very weak diversification

The 3 months correlation between Ryanair and Air is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings PLC and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Ryanair Holdings 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 Holdings PLC are associated (or correlated) with Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and Air Lease go up and down completely randomly.

Pair Corralation between Ryanair Holdings and Air Lease

Assuming the 90 days horizon Ryanair Holdings PLC is expected to generate 1.05 times more return on investment than Air Lease. However, Ryanair Holdings is 1.05 times more volatile than Air Lease. It trades about 0.19 of its potential returns per unit of risk. Air Lease is currently generating about 0.17 per unit of risk. If you would invest  9,356  in Ryanair Holdings PLC on February 1, 2024 and sell it today you would earn a total of  4,264  from holding Ryanair Holdings PLC or generate 45.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

Ryanair Holdings PLC  vs.  Air Lease

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.

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.

Pair Trading with Ryanair Holdings and Air Lease

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

The idea behind Ryanair Holdings PLC and Air Lease 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.