Correlation Between Ramsay Health and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Ramsay Health and Electronic Arts 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 Electronic Arts 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 Electronic Arts, you can compare the effects of market volatilities on Ramsay Health and Electronic Arts 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 Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ramsay Health and Electronic Arts.
Diversification Opportunities for Ramsay Health and Electronic Arts
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ramsay and Electronic is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ramsay Health Care and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts 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 Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of Ramsay Health i.e., Ramsay Health and Electronic Arts go up and down completely randomly.
Pair Corralation between Ramsay Health and Electronic Arts
Assuming the 90 days horizon Ramsay Health Care is expected to under-perform the Electronic Arts. In addition to that, Ramsay Health is 1.28 times more volatile than Electronic Arts. It trades about -0.37 of its total potential returns per unit of risk. Electronic Arts is currently generating about -0.42 per unit of volatility. If you would invest 15,811 in Electronic Arts on September 25, 2024 and sell it today you would lose (1,705) from holding Electronic Arts or give up 10.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ramsay Health Care vs. Electronic Arts
Performance |
| Timeline |
| Ramsay Health Care |
| Electronic Arts |
Ramsay Health and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ramsay Health and Electronic Arts
The main advantage of trading using opposite Ramsay Health and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ramsay Health position performs unexpectedly, Electronic Arts 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 Electronic Arts will offset losses from the drop in Electronic Arts' long position.The idea behind Ramsay Health Care and Electronic Arts 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.| Electronic Arts vs. ANTA SPORTS PRODUCT | Electronic Arts vs. Transportadora de Gas | Electronic Arts vs. COLUMBIA SPORTSWEAR | Electronic Arts 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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