Correlation Between Guangdong Investment and Ryanair Holdings

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

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

Diversification Opportunities for Guangdong Investment and Ryanair Holdings

-0.27

Correlation Coefficient

Guangdong Investment  Ryanair Holdings

Very good diversification

The 3 months correlation between Guangdong and Ryanair is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited 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 Guangdong Investment 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 Guangdong Investment Limited 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 Guangdong Investment i.e., Guangdong Investment and Ryanair Holdings go up and down completely randomly.

Pair Corralation between Guangdong Investment and Ryanair Holdings

Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 2.7 times more return on investment than Ryanair Holdings. However, Guangdong Investment is 2.7 times more volatile than Ryanair Holdings PLC. It trades about 0.11 of its potential returns per unit of risk. Ryanair Holdings PLC is currently generating about -0.03 per unit of risk. If you would invest  60.00  in Guangdong Investment Limited on September 25, 2024 and sell it today you would earn a total of  19.00  from holding Guangdong Investment Limited or generate 31.67% return on investment over 90 days.

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

Guangdong Investment Limited  vs.  Ryanair Holdings PLC

Guangdong Investment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangdong Investment reported 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangdong Investment and Ryanair Holdings

The main advantage of trading using opposite Guangdong Investment and Ryanair Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment 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 Guangdong Investment Limited 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.