Correlation Between RYANAIR HLDGS and Qantas Airways

Can any of the company-specific risk be diversified away by investing in both RYANAIR HLDGS and Qantas Airways 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 Qantas Airways 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 Qantas Airways Limited, you can compare the effects of market volatilities on RYANAIR HLDGS and Qantas Airways 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 Qantas Airways. Check out your portfolio center. Please also check ongoing floating volatility patterns of RYANAIR HLDGS and Qantas Airways.

Diversification Opportunities for RYANAIR HLDGS and Qantas Airways

0.03

Correlation Coefficient

RYANAIR HLDGS  Qantas Airways

Significant diversification

The 3 months correlation between RYANAIR and Qantas is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding RYANAIR HLDGS ADR and Qantas Airways Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qantas Airways 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 Qantas Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qantas Airways has no effect on the direction of RYANAIR HLDGS i.e., RYANAIR HLDGS and Qantas Airways go up and down completely randomly.

Pair Corralation between RYANAIR HLDGS and Qantas Airways

Assuming the 90 days trading horizon RYANAIR HLDGS ADR is expected to generate 11.17 times more return on investment than Qantas Airways. However, RYANAIR HLDGS is 11.17 times more volatile than Qantas Airways Limited. It trades about 0.07 of its potential returns per unit of risk. Qantas Airways Limited is currently generating about 0.16 per unit of risk. If you would invest  4,000  in RYANAIR HLDGS ADR on September 23, 2024 and sell it today you would earn a total of  280.00  from holding RYANAIR HLDGS ADR or generate 7.0% return on investment over 90 days.

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

RYANAIR HLDGS ADR  vs.  Qantas Airways Limited

RYANAIR HLDGS ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RYANAIR HLDGS ADR are ranked lower than 5 (%) 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.

Qantas Airways

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qantas Airways Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Qantas Airways reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RYANAIR HLDGS and Qantas Airways

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

The idea behind RYANAIR HLDGS ADR and Qantas Airways Limited 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.