Correlation Between Ramsay Health and Medical Developments

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Can any of the company-specific risk be diversified away by investing in both Ramsay Health and Medical Developments 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 Ramsay Health and Medical Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ramsay Health Care and Medical Developments International, you can compare the effects of market volatilities on Ramsay Health and Medical Developments 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 Ramsay Health with a short position of Medical Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ramsay Health and Medical Developments.

Diversification Opportunities for Ramsay Health and Medical Developments

RamsayMedicalDiversified AwayRamsayMedicalDiversified Away100%
-0.32
  Correlation Coefficient

Very good diversification

The 3 months correlation between Ramsay and Medical is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ramsay Health Care and Medical Developments Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Developments and Ramsay Health 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 Ramsay Health Care are associated (or correlated) with Medical Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Developments has no effect on the direction of Ramsay Health i.e., Ramsay Health and Medical Developments go up and down completely randomly.

Pair Corralation between Ramsay Health and Medical Developments

Assuming the 90 days trading horizon Ramsay Health Care is expected to under-perform the Medical Developments. But the stock apears to be less risky and, when comparing its historical volatility, Ramsay Health Care is 3.35 times less risky than Medical Developments. The stock trades about -0.07 of its potential returns per unit of risk. The Medical Developments International is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  123.00  in Medical Developments International on November 30, 2024 and sell it today you would lose (56.00) from holding Medical Developments International or give up 45.53% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Ramsay Health Care  vs.  Medical Developments Internati

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -20020406080100120
JavaScript chart by amCharts 3.21.15RHC MVP
       Timeline  
Ramsay Health Care 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Ramsay Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb333435363738394041
Medical Developments 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Medical Developments International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Medical Developments unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.40.50.60.70.80.9

Ramsay Health and Medical Developments Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.73-2.04-1.36-0.670.00.631.281.922.57 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15RHC MVP
       Returns  

Pair Trading with Ramsay Health and Medical Developments

The main advantage of trading using opposite Ramsay Health and Medical Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ramsay Health position performs unexpectedly, Medical Developments 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 Medical Developments will offset losses from the drop in Medical Developments' long position.
The idea behind Ramsay Health Care and Medical Developments International 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.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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