Correlation Between Ryanair Holdings and InterContinental

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

Diversification Opportunities for Ryanair Holdings and InterContinental

0.91

Correlation Coefficient

Ryanair Holdings  InterContinental

Almost no diversification

The 3 months correlation between Ryanair and InterContinental is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings plc and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels 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 InterContinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterContinental Hotels has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and InterContinental go up and down completely randomly.

Pair Corralation between Ryanair Holdings and InterContinental

Assuming the 90 days trading horizon Ryanair Holdings is expected to generate 1.7 times less return on investment than InterContinental. In addition to that, Ryanair Holdings is 1.7 times more volatile than InterContinental Hotels Group. It trades about 0.04 of its total potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.13 per unit of volatility. If you would invest  465,636  in InterContinental Hotels Group on September 24, 2024 and sell it today you would earn a total of  529,964  from holding InterContinental Hotels Group or generate 113.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Ryanair Holdings plc  vs.  InterContinental Hotels Group

Ryanair Holdings plc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 12 (%) 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.

InterContinental Hotels

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, InterContinental exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ryanair Holdings and InterContinental

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

The idea behind Ryanair Holdings plc and InterContinental Hotels Group 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.