Correlation Between NORTHEAST UTILITIES and Ramsay Health
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES 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 NORTHEAST UTILITIES and Ramsay Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and Ramsay Health Care, you can compare the effects of market volatilities on NORTHEAST UTILITIES 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 NORTHEAST UTILITIES with a short position of Ramsay Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and Ramsay Health.
Diversification Opportunities for NORTHEAST UTILITIES and Ramsay Health
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NORTHEAST and Ramsay is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES 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 NORTHEAST UTILITIES 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 NORTHEAST UTILITIES 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 NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and Ramsay Health go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and Ramsay Health
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 0.88 times more return on investment than Ramsay Health. However, NORTHEAST UTILITIES is 1.13 times less risky than Ramsay Health. It trades about -0.02 of its potential returns per unit of risk. Ramsay Health Care is currently generating about -0.08 per unit of risk. If you would invest 6,692 in NORTHEAST UTILITIES on October 14, 2024 and sell it today you would lose (1,192) from holding NORTHEAST UTILITIES or give up 17.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. Ramsay Health Care
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| Ramsay Health Care |
NORTHEAST UTILITIES and Ramsay Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and Ramsay Health
The main advantage of trading using opposite NORTHEAST UTILITIES and Ramsay Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES 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.| NORTHEAST UTILITIES vs. Granite Construction | NORTHEAST UTILITIES vs. VIRGIN WINES UK | NORTHEAST UTILITIES vs. ALEFARM BREWING DK 05 | NORTHEAST UTILITIES vs. Hanison Construction Holdings |
| Ramsay Health vs. CDN IMPERIAL BANK | Ramsay Health vs. NORTHEAST UTILITIES | Ramsay Health vs. CVB Financial Corp | Ramsay Health vs. MOLSON RS BEVERAGE |
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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