Correlation Between Woolworths and Ramsay Health
Can any of the company-specific risk be diversified away by investing in both Woolworths 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 Woolworths and Ramsay Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Woolworths and Ramsay Health Care, you can compare the effects of market volatilities on Woolworths 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 Woolworths with a short position of Ramsay Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woolworths and Ramsay Health.
Diversification Opportunities for Woolworths and Ramsay Health
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Woolworths and Ramsay is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths 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 Woolworths 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 Woolworths 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 Woolworths i.e., Woolworths and Ramsay Health go up and down completely randomly.
Pair Corralation between Woolworths and Ramsay Health
Assuming the 90 days trading horizon Woolworths is expected to under-perform the Ramsay Health. But the stock apears to be less risky and, when comparing its historical volatility, Woolworths is 1.11 times less risky than Ramsay Health. The stock trades about -0.24 of its potential returns per unit of risk. The Ramsay Health Care is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 4,149 in Ramsay Health Care on August 29, 2024 and sell it today you would lose (214.00) from holding Ramsay Health Care or give up 5.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woolworths vs. Ramsay Health Care
Performance |
| Timeline |
| Woolworths |
| Ramsay Health Care |
Woolworths and Ramsay Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woolworths and Ramsay Health
The main advantage of trading using opposite Woolworths and Ramsay Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woolworths 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.| Woolworths vs. Hotel Property Investments | Woolworths vs. Mayfield Childcare | Woolworths vs. Toys R Us | Woolworths vs. Cleanaway Waste Management |
| Ramsay Health vs. Aristocrat Leisure | Ramsay Health vs. Carawine Resources Limited | Ramsay Health vs. G8 Education | Ramsay Health vs. Black Rock Mining |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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