Correlation Between Ryanair Holdings and CVS Health

Can any of the company-specific risk be diversified away by investing in both Ryanair Holdings and CVS Health 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 CVS Health 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 CVS Health Corp, you can compare the effects of market volatilities on Ryanair Holdings and CVS Health 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 CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ryanair Holdings and CVS Health.

Diversification Opportunities for Ryanair Holdings and CVS Health

-0.25

Correlation Coefficient

Ryanair Holdings  CVS Health

Very good diversification

The 3 months correlation between Ryanair and CVS is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings plc and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and CVS Health go up and down completely randomly.

Pair Corralation between Ryanair Holdings and CVS Health

Assuming the 90 days trading horizon Ryanair Holdings is expected to generate 1.85 times less return on investment than CVS Health. But when comparing it to its historical volatility, Ryanair Holdings plc is 2.34 times less risky than CVS Health. It trades about 0.13 of its potential returns per unit of risk. CVS Health Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,517  in CVS Health Corp on September 4, 2024 and sell it today you would earn a total of  424.00  from holding CVS Health Corp or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Ryanair Holdings plc  vs.  CVS Health Corp

Ryanair Holdings plc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Ryanair Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CVS Health Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CVS Health is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ryanair Holdings and CVS Health

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

The idea behind Ryanair Holdings plc and CVS Health Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.