Correlation Between Fresenius Medical and Ramsay Health

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

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

Diversification Opportunities for Fresenius Medical and Ramsay Health

-0.41

Correlation Coefficient

Fresenius Medical  Ramsay Health

Very good diversification

The 3 months correlation between Fresenius and Ramsay is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care 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 Fresenius Medical 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 Fresenius Medical Care 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 Fresenius Medical i.e., Fresenius Medical and Ramsay Health go up and down completely randomly.

Pair Corralation between Fresenius Medical and Ramsay Health

Assuming the 90 days horizon Fresenius Medical Care is expected to generate 1.27 times more return on investment than Ramsay Health. However, Fresenius Medical is 1.27 times more volatile than Ramsay Health Care. It trades about 0.16 of its potential returns per unit of risk. Ramsay Health Care is currently generating about 0.01 per unit of risk. If you would invest  3,453  in Fresenius Medical Care on August 31, 2024 and sell it today you would earn a total of  683.00  from holding Fresenius Medical Care or generate 19.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Fresenius Medical Care  vs.  Ramsay Health Care

Fresenius Medical Care

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fresenius Medical reported solid returns over the last few months and may actually be approaching a breakup point.

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 nearly stable basic indicators, Ramsay Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fresenius Medical and Ramsay Health

The main advantage of trading using opposite Fresenius Medical and Ramsay Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresenius Medical 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 Fresenius Medical Care 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.