Correlation Between Kerry and Ryanair Holdings
Can any of the company-specific risk be diversified away by investing in both Kerry 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 Kerry and Ryanair Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kerry Group and Ryanair Holdings plc, you can compare the effects of market volatilities on Kerry 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 Kerry with a short position of Ryanair Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kerry and Ryanair Holdings.
Diversification Opportunities for Kerry and Ryanair Holdings
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kerry and Ryanair is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Kerry Group 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 Kerry 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 Kerry Group 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 Kerry i.e., Kerry and Ryanair Holdings go up and down completely randomly.
Pair Corralation between Kerry and Ryanair Holdings
Assuming the 90 days trading horizon Kerry is expected to generate 1.18 times less return on investment than Ryanair Holdings. But when comparing it to its historical volatility, Kerry Group is 1.45 times less risky than Ryanair Holdings. It trades about 0.19 of its potential returns per unit of risk. Ryanair Holdings plc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,888 in Ryanair Holdings plc on November 30, 2024 and sell it today you would earn a total of 207.00 from holding Ryanair Holdings plc or generate 10.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kerry Group vs. Ryanair Holdings plc
Performance |
| Timeline |
| Kerry Group |
| Ryanair Holdings plc |
Kerry and Ryanair Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kerry and Ryanair Holdings
The main advantage of trading using opposite Kerry and Ryanair Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kerry 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 Kerry Group 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.| Ryanair Holdings vs. Bank of Ireland | Ryanair Holdings vs. AIB Group PLC | Ryanair Holdings vs. Kingspan Group plc |
Check out your portfolio center.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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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