Correlation Between Ryanair Holdings and European Lithium

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

Diversification Opportunities for Ryanair Holdings and European Lithium

-0.56

Correlation Coefficient

Ryanair Holdings  European Lithium

Excellent diversification

The 3 months correlation between Ryanair and European is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings plc and European Lithium Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Lithium 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 European Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Lithium has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and European Lithium go up and down completely randomly.

Pair Corralation between Ryanair Holdings and European Lithium

Assuming the 90 days trading horizon Ryanair Holdings plc is expected to generate 0.23 times more return on investment than European Lithium. However, Ryanair Holdings plc is 4.26 times less risky than European Lithium. It trades about -0.02 of its potential returns per unit of risk. European Lithium Limited is currently generating about -0.1 per unit of risk. If you would invest  2,049  in Ryanair Holdings plc on February 2, 2024 and sell it today you would lose (20.00) from holding Ryanair Holdings plc or give up 0.98% of portfolio value over 90 days.

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

Ryanair Holdings plc  vs.  European Lithium Limited

Ryanair Holdings plc

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Ryanair Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

European Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Lithium Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ryanair Holdings and European Lithium

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

The idea behind Ryanair Holdings plc and European Lithium 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.