Correlation Between Life Healthcare and Ramsay Health
Can any of the company-specific risk be diversified away by investing in both Life Healthcare 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 Life Healthcare and Ramsay Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Healthcare Group and Ramsay Health Care, you can compare the effects of market volatilities on Life Healthcare 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 Life Healthcare with a short position of Ramsay Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Healthcare and Ramsay Health.
Diversification Opportunities for Life Healthcare and Ramsay Health
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Life and Ramsay is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Life Healthcare Group 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 Life Healthcare 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 Life Healthcare Group 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 Life Healthcare i.e., Life Healthcare and Ramsay Health go up and down completely randomly.
Pair Corralation between Life Healthcare and Ramsay Health
Assuming the 90 days horizon Life Healthcare Group is expected to generate 1.78 times more return on investment than Ramsay Health. However, Life Healthcare is 1.78 times more volatile than Ramsay Health Care. It trades about 0.06 of its potential returns per unit of risk. Ramsay Health Care is currently generating about 0.01 per unit of risk. If you would invest 255.00 in Life Healthcare Group on September 4, 2024 and sell it today you would earn a total of 111.00 from holding Life Healthcare Group or generate 43.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 48.62% |
| Values | Daily Returns |
Life Healthcare Group vs. Ramsay Health Care
Performance |
| Timeline |
| Life Healthcare Group |
| Ramsay Health Care |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Life Healthcare and Ramsay Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Healthcare and Ramsay Health
The main advantage of trading using opposite Life Healthcare and Ramsay Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Healthcare 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.| Life Healthcare vs. Fresenius SE Co | Life Healthcare vs. Select Medical Holdings | Life Healthcare vs. Ramsay Health Care | Life Healthcare vs. Jack Nathan Medical |
| Ramsay Health vs. Fresenius SE Co | Ramsay Health vs. Life Healthcare Group | Ramsay Health vs. Select Medical Holdings | Ramsay Health vs. Ramsay Health Care |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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