Correlation Between Sumitomo Rubber and Ramsay Health

Can any of the company-specific risk be diversified away by investing in both Sumitomo Rubber 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 Sumitomo Rubber and Ramsay Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sumitomo Rubber Industries and Ramsay Health Care, you can compare the effects of market volatilities on Sumitomo Rubber 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 Sumitomo Rubber with a short position of Ramsay Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Rubber and Ramsay Health.

Diversification Opportunities for Sumitomo Rubber and Ramsay Health

0.52

Correlation Coefficient

Sumitomo Rubber  Ramsay Health

Very weak diversification

The 3 months correlation between Sumitomo and Ramsay is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries 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 Sumitomo Rubber 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 Sumitomo Rubber Industries 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 Sumitomo Rubber i.e., Sumitomo Rubber and Ramsay Health go up and down completely randomly.

Pair Corralation between Sumitomo Rubber and Ramsay Health

Assuming the 90 days horizon Sumitomo Rubber Industries is expected to under-perform the Ramsay Health. In addition to that, Sumitomo Rubber is 8.47 times more volatile than Ramsay Health Care. It trades about -0.01 of its total potential returns per unit of risk. Ramsay Health Care is currently generating about -0.08 per unit of volatility. If you would invest  4,076  in Ramsay Health Care on September 28, 2024 and sell it today you would lose (2,016) from holding Ramsay Health Care or give up 49.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Sumitomo Rubber Industries  vs.  Ramsay Health Care

Sumitomo Rubber Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumitomo Rubber Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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 Care

Risk-Adjusted Performance

0 of 100

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 unsteady 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.

Pair Trading with Sumitomo Rubber and Ramsay Health

The main advantage of trading using opposite Sumitomo Rubber and Ramsay Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Rubber 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.

The idea behind Sumitomo Rubber Industries and Ramsay Health Care 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.