Correlation Between Ryanair Holdings and Allegheny Technologies

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

Diversification Opportunities for Ryanair Holdings and Allegheny Technologies

-0.35

Correlation Coefficient

Ryanair Holdings  Allegheny Technologies

Very good diversification

The 3 months correlation between Ryanair and Allegheny is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings PLC and Allegheny Technologies Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegheny Technologies 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 Allegheny Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegheny Technologies has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and Allegheny Technologies go up and down completely randomly.

Pair Corralation between Ryanair Holdings and Allegheny Technologies

Assuming the 90 days horizon Ryanair Holdings is expected to generate 1.44 times less return on investment than Allegheny Technologies. But when comparing it to its historical volatility, Ryanair Holdings PLC is 1.14 times less risky than Allegheny Technologies. It trades about 0.05 of its potential returns per unit of risk. Allegheny Technologies Incorporated is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,002  in Allegheny Technologies Incorporated on August 22, 2024 and sell it today you would earn a total of  2,821  from holding Allegheny Technologies Incorporated or generate 93.97% return on investment over 90 days.

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

Ryanair Holdings PLC  vs.  Allegheny Technologies Incorpo

Ryanair Holdings PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Ryanair Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Allegheny Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allegheny Technologies Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Ryanair Holdings and Allegheny Technologies

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

The idea behind Ryanair Holdings PLC and Allegheny Technologies Incorporated 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.