Correlation Between Bank of Ireland and Ryanair Holdings

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

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

Diversification Opportunities for Bank of Ireland and Ryanair Holdings

-0.79

Correlation Coefficient

Bank of Ireland  Ryanair Holdings

Pay attention - limited upside

The 3 months correlation between Bank and Ryanair is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Ireland 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 Bank of Ireland 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 Bank of Ireland 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 Bank of Ireland i.e., Bank of Ireland and Ryanair Holdings go up and down completely randomly.

Pair Corralation between Bank of Ireland and Ryanair Holdings

Assuming the 90 days trading horizon Bank of Ireland is expected to under-perform the Ryanair Holdings. In addition to that, Bank of Ireland is 1.16 times more volatile than Ryanair Holdings plc. It trades about -0.11 of its total potential returns per unit of risk. Ryanair Holdings plc is currently generating about 0.19 per unit of volatility. If you would invest  1,520  in Ryanair Holdings plc on August 23, 2024 and sell it today you would earn a total of  329.00  from holding Ryanair Holdings plc or generate 21.64% return on investment over 90 days.

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

Bank of Ireland  vs.  Ryanair Holdings plc

Bank of Ireland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of Ireland has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Ryanair Holdings plc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ryanair Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Ireland and Ryanair Holdings

The main advantage of trading using opposite Bank of Ireland and Ryanair Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Ireland 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 Bank of Ireland 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.