Correlation Between Ryanair Holdings and TELECOM ITALIA

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

Diversification Opportunities for Ryanair Holdings and TELECOM ITALIA

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between Ryanair and TELECOM is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings plc and TELECOM ITALIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELECOM ITALIA 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 TELECOM ITALIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TELECOM ITALIA has no effect on the direction of Ryanair Holdings i.e., Ryanair Holdings and TELECOM ITALIA go up and down completely randomly.

Pair Corralation between Ryanair Holdings and TELECOM ITALIA

Assuming the 90 days trading horizon Ryanair Holdings plc is expected to generate 0.74 times more return on investment than TELECOM ITALIA. However, Ryanair Holdings plc is 1.35 times less risky than TELECOM ITALIA. It trades about 0.15 of its potential returns per unit of risk. TELECOM ITALIA is currently generating about 0.1 per unit of risk. If you would invest  1,885  in Ryanair Holdings plc on October 28, 2024 and sell it today you would earn a total of  96.00  from holding Ryanair Holdings plc or generate 5.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ryanair Holdings plc  vs.  TELECOM ITALIA

 Performance 
       Timeline  
Ryanair Holdings plc 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Ryanair Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.
TELECOM ITALIA 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in TELECOM ITALIA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TELECOM ITALIA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Ryanair Holdings and TELECOM ITALIA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ryanair Holdings and TELECOM ITALIA

The main advantage of trading using opposite Ryanair Holdings and TELECOM ITALIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ryanair Holdings position performs unexpectedly, TELECOM ITALIA 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 TELECOM ITALIA will offset losses from the drop in TELECOM ITALIA's long position.
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The idea behind Ryanair Holdings plc and TELECOM ITALIA 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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