Correlation Between Commonwealth Bank and Ramsay Health
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank 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 Commonwealth Bank and Ramsay Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and Ramsay Health Care, you can compare the effects of market volatilities on Commonwealth Bank 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 Commonwealth Bank with a short position of Ramsay Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Ramsay Health.
Diversification Opportunities for Commonwealth Bank and Ramsay Health
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Commonwealth and Ramsay is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank 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 Commonwealth Bank 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 Commonwealth Bank 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 Commonwealth Bank i.e., Commonwealth Bank and Ramsay Health go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Ramsay Health
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 0.77 times more return on investment than Ramsay Health. However, Commonwealth Bank is 1.3 times less risky than Ramsay Health. It trades about 0.16 of its potential returns per unit of risk. Ramsay Health Care is currently generating about -0.04 per unit of risk. If you would invest 10,245 in Commonwealth Bank on September 2, 2024 and sell it today you would earn a total of 5,613 from holding Commonwealth Bank or generate 54.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank vs. Ramsay Health Care
Performance |
| Timeline |
| Commonwealth Bank |
| Ramsay Health Care |
Commonwealth Bank and Ramsay Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Ramsay Health
The main advantage of trading using opposite Commonwealth Bank and Ramsay Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank 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.| Commonwealth Bank vs. Macquarie Group | Commonwealth Bank vs. Rio Tinto | Commonwealth Bank vs. CSL | Commonwealth Bank vs. Commonwealth Bank of |
| Ramsay Health vs. Group 6 Metals | Ramsay Health vs. Stelar Metals | Ramsay Health vs. American West Metals | Ramsay Health vs. RLF AgTech |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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