Correlation Between Australian United and Ramsay Health
Can any of the company-specific risk be diversified away by investing in both Australian United and Ramsay Health 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 Australian United and Ramsay Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian United Investment and Ramsay Health Care, you can compare the effects of market volatilities on Australian United and Ramsay Health 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 Australian United with a short position of Ramsay Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian United and Ramsay Health.
Diversification Opportunities for Australian United and Ramsay Health
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Australian and Ramsay is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Australian United Investment and Ramsay Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramsay Health Care and Australian United 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 Australian United Investment are associated (or correlated) with Ramsay Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramsay Health Care has no effect on the direction of Australian United i.e., Australian United and Ramsay Health go up and down completely randomly.
Pair Corralation between Australian United and Ramsay Health
Assuming the 90 days trading horizon Australian United Investment is expected to generate 0.5 times more return on investment than Ramsay Health. However, Australian United Investment is 1.98 times less risky than Ramsay Health. It trades about -0.04 of its potential returns per unit of risk. Ramsay Health Care is currently generating about -0.13 per unit of risk. If you would invest 1,086 in Australian United Investment on August 29, 2024 and sell it today you would lose (10.00) from holding Australian United Investment or give up 0.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian United Investment vs. Ramsay Health Care
Performance |
| Timeline |
| Australian United |
| Ramsay Health Care |
Australian United and Ramsay Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian United and Ramsay Health
The main advantage of trading using opposite Australian United and Ramsay Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian United position performs unexpectedly, Ramsay Health 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 Ramsay Health will offset losses from the drop in Ramsay Health's long position.| Australian United vs. Global Health | Australian United vs. Toys R Us | Australian United vs. Tombador Iron | Australian United vs. Aussie Broadband |
| Ramsay Health vs. Aristocrat Leisure | Ramsay Health vs. Carawine Resources Limited | Ramsay Health vs. G8 Education | Ramsay Health vs. Black Rock Mining |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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