Correlation Between Wesfarmers and Ramsay Health
Can any of the company-specific risk be diversified away by investing in both Wesfarmers 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 Wesfarmers and Ramsay Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesfarmers and Ramsay Health Care, you can compare the effects of market volatilities on Wesfarmers 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 Wesfarmers with a short position of Ramsay Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesfarmers and Ramsay Health.
Diversification Opportunities for Wesfarmers and Ramsay Health
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wesfarmers and Ramsay is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers 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 Wesfarmers 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 Wesfarmers 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 Wesfarmers i.e., Wesfarmers and Ramsay Health go up and down completely randomly.
Pair Corralation between Wesfarmers and Ramsay Health
Assuming the 90 days trading horizon Wesfarmers is expected to generate 0.87 times more return on investment than Ramsay Health. However, Wesfarmers is 1.14 times less risky than Ramsay Health. It trades about 0.28 of its potential returns per unit of risk. Ramsay Health Care is currently generating about -0.09 per unit of risk. If you would invest 7,181 in Wesfarmers on November 4, 2024 and sell it today you would earn a total of 479.00 from holding Wesfarmers or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wesfarmers vs. Ramsay Health Care
Performance |
| Timeline |
| Wesfarmers |
| Ramsay Health Care |
Wesfarmers and Ramsay Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wesfarmers and Ramsay Health
The main advantage of trading using opposite Wesfarmers and Ramsay Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesfarmers 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.| Wesfarmers vs. Macquarie Bank Limited | Wesfarmers vs. Mayfield Childcare | Wesfarmers vs. Insignia Financial | Wesfarmers vs. Insurance Australia Group |
| Ramsay Health vs. Meeka Metals Limited | Ramsay Health vs. Centrex Metals | Ramsay Health vs. Torque Metals | Ramsay Health vs. Cosmo Metals |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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