Correlation Between BlueScope Steel and Ramsay Health
Can any of the company-specific risk be diversified away by investing in both BlueScope Steel 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 BlueScope Steel and Ramsay Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BlueScope Steel Limited and Ramsay Health Care, you can compare the effects of market volatilities on BlueScope Steel 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 BlueScope Steel with a short position of Ramsay Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and Ramsay Health.
Diversification Opportunities for BlueScope Steel and Ramsay Health
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BlueScope and Ramsay is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited 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 BlueScope Steel 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 BlueScope Steel Limited 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 BlueScope Steel i.e., BlueScope Steel and Ramsay Health go up and down completely randomly.
Pair Corralation between BlueScope Steel and Ramsay Health
Assuming the 90 days horizon BlueScope Steel Limited is expected to generate 1.13 times more return on investment than Ramsay Health. However, BlueScope Steel is 1.13 times more volatile than Ramsay Health Care. It trades about 0.03 of its potential returns per unit of risk. Ramsay Health Care is currently generating about -0.05 per unit of risk. If you would invest 1,154 in BlueScope Steel Limited on August 31, 2024 and sell it today you would earn a total of 206.00 from holding BlueScope Steel Limited or generate 17.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.74% |
| Values | Daily Returns |
BlueScope Steel Limited vs. Ramsay Health Care
Performance |
| Timeline |
| BlueScope Steel |
| Ramsay Health Care |
BlueScope Steel and Ramsay Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BlueScope Steel and Ramsay Health
The main advantage of trading using opposite BlueScope Steel and Ramsay Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel 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.The idea behind BlueScope Steel Limited and Ramsay Health Care 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.| Ramsay Health vs. Richter Gedeon Vegyszeti | Ramsay Health vs. Charoen Pokphand Foods | Ramsay Health vs. Superior Plus Corp | Ramsay Health vs. Origin Agritech |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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