Correlation Between Ramsay Health and Paladin Energy

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

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

Diversification Opportunities for Ramsay Health and Paladin Energy

0.84

Correlation Coefficient

Ramsay Health  Paladin Energy

Very poor diversification

The 3 months correlation between Ramsay and Paladin is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ramsay Health Care and Paladin Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paladin Energy and Ramsay Health 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 Ramsay Health Care are associated (or correlated) with Paladin Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paladin Energy has no effect on the direction of Ramsay Health i.e., Ramsay Health and Paladin Energy go up and down completely randomly.

Pair Corralation between Ramsay Health and Paladin Energy

Assuming the 90 days trading horizon Ramsay Health Care is expected to under-perform the Paladin Energy. But the stock apears to be less risky and, when comparing its historical volatility, Ramsay Health Care is 4.02 times less risky than Paladin Energy. The stock trades about -0.09 of its potential returns per unit of risk. The Paladin Energy is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  913.00  in Paladin Energy on September 17, 2024 and sell it today you would lose (118.00) from holding Paladin Energy or give up 12.92% of portfolio value over 90 days.

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

Ramsay Health Care  vs.  Paladin Energy

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. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Paladin Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paladin Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Paladin Energy is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ramsay Health and Paladin Energy

The main advantage of trading using opposite Ramsay Health and Paladin Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ramsay Health position performs unexpectedly, Paladin Energy 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 Paladin Energy will offset losses from the drop in Paladin Energy's long position.

The idea behind Ramsay Health Care and Paladin Energy 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.