Correlation Between Ramsay Health and Peak Resources

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Can any of the company-specific risk be diversified away by investing in both Ramsay Health and Peak Resources 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 Peak Resources 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 Peak Resources Limited, you can compare the effects of market volatilities on Ramsay Health and Peak Resources 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 Peak Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ramsay Health and Peak Resources.

Diversification Opportunities for Ramsay Health and Peak Resources

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Ramsay and Peak is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ramsay Health Care and Peak Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peak Resources 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 Peak Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peak Resources has no effect on the direction of Ramsay Health i.e., Ramsay Health and Peak Resources go up and down completely randomly.

Pair Corralation between Ramsay Health and Peak Resources

Assuming the 90 days horizon Ramsay Health Care is expected to under-perform the Peak Resources. But the stock apears to be less risky and, when comparing its historical volatility, Ramsay Health Care is 6.2 times less risky than Peak Resources. The stock trades about -0.06 of its potential returns per unit of risk. The Peak Resources Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.75  in Peak Resources Limited on September 15, 2024 and sell it today you would lose (0.15) from holding Peak Resources Limited or give up 2.61% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Ramsay Health Care  vs.  Peak Resources Limited

 Performance 
       Timeline  
Ramsay Health Care 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ramsay Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Peak Resources 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Peak Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Ramsay Health and Peak Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ramsay Health and Peak Resources

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

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