Correlation Between Eagle Materials and Ramsay Health

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

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

Diversification Opportunities for Eagle Materials and Ramsay Health

0.2

Correlation Coefficient

Eagle Materials  Ramsay Health

Modest diversification

The 3 months correlation between Eagle and Ramsay is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials 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 Eagle Materials 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 Eagle Materials 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 Eagle Materials i.e., Eagle Materials and Ramsay Health go up and down completely randomly.

Pair Corralation between Eagle Materials and Ramsay Health

Assuming the 90 days horizon Eagle Materials is expected to generate 1.21 times more return on investment than Ramsay Health. However, Eagle Materials is 1.21 times more volatile than Ramsay Health Care. It trades about 0.07 of its potential returns per unit of risk. Ramsay Health Care is currently generating about -0.08 per unit of risk. If you would invest  12,958  in Eagle Materials on October 5, 2024 and sell it today you would earn a total of  10,642  from holding Eagle Materials or generate 82.13% return on investment over 90 days.

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

Eagle Materials  vs.  Ramsay Health Care

Eagle Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Materials 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.

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Eagle Materials and Ramsay Health

The main advantage of trading using opposite Eagle Materials and Ramsay Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials 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 Eagle Materials 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.