Correlation Between Alto Metals and Ramsay Health

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

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

Diversification Opportunities for Alto Metals and Ramsay Health

0.72

Correlation Coefficient

Alto Metals  Ramsay Health

Poor diversification

The 3 months correlation between Alto and Ramsay is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Alto Metals 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 Alto Metals 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 Alto Metals 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 Alto Metals i.e., Alto Metals and Ramsay Health go up and down completely randomly.

Pair Corralation between Alto Metals and Ramsay Health

Assuming the 90 days trading horizon Alto Metals is expected to generate 13.41 times more return on investment than Ramsay Health. However, Alto Metals is 13.41 times more volatile than Ramsay Health Care. It trades about 0.21 of its potential returns per unit of risk. Ramsay Health Care is currently generating about 0.16 per unit of risk. If you would invest  6.40  in Alto Metals on September 13, 2024 and sell it today you would earn a total of  3.00  from holding Alto Metals or generate 46.88% return on investment over 90 days.

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

Alto Metals  vs.  Ramsay Health Care

Alto Metals

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alto Metals are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Alto Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ramsay Health Care

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ramsay Health Care are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ramsay Health is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alto Metals and Ramsay Health

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

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .