Correlation Between Ramsay Health and Woolworths

Can any of the company-specific risk be diversified away by investing in both Ramsay Health and Woolworths 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 Woolworths 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 Woolworths, you can compare the effects of market volatilities on Ramsay Health and Woolworths 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 Woolworths. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ramsay Health and Woolworths.

Diversification Opportunities for Ramsay Health and Woolworths

0.53

Correlation Coefficient

Ramsay Health  Woolworths

Very weak diversification

The 3 months correlation between Ramsay and Woolworths is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ramsay Health Care and Woolworths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths 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 Woolworths. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths has no effect on the direction of Ramsay Health i.e., Ramsay Health and Woolworths go up and down completely randomly.

Pair Corralation between Ramsay Health and Woolworths

Assuming the 90 days trading horizon Ramsay Health Care is expected to generate 1.09 times more return on investment than Woolworths. However, Ramsay Health is 1.09 times more volatile than Woolworths. It trades about -0.01 of its potential returns per unit of risk. Woolworths is currently generating about -0.17 per unit of risk. If you would invest  4,031  in Ramsay Health Care on September 3, 2024 and sell it today you would lose (72.00) from holding Ramsay Health Care or give up 1.79% of portfolio value over 90 days.

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

Ramsay Health Care  vs.  Woolworths

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 comparatively stable fundamental indicators, Ramsay Health is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Woolworths

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woolworths has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ramsay Health and Woolworths

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

The idea behind Ramsay Health Care and Woolworths 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.