Correlation Between Ramsay Health and National Health

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

Diversification Opportunities for Ramsay Health and National Health

0.29

Correlation Coefficient

Ramsay Health  National Health

Modest diversification

The 3 months correlation between Ramsay and National is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ramsay Health Care and National Health Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Investors 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 National Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Health Investors has no effect on the direction of Ramsay Health i.e., Ramsay Health and National Health go up and down completely randomly.

Pair Corralation between Ramsay Health and National Health

Assuming the 90 days horizon Ramsay Health Care is expected to under-perform the National Health. But the stock apears to be less risky and, when comparing its historical volatility, Ramsay Health Care is 1.25 times less risky than National Health. The stock trades about -0.16 of its potential returns per unit of risk. The National Health Investors is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  7,409  in National Health Investors on September 22, 2024 and sell it today you would lose (809.00) from holding National Health Investors or give up 10.92% of portfolio value over 90 days.

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

Ramsay Health Care  vs.  National Health Investors

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

National Health Investors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Health Investors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ramsay Health and National Health

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

The idea behind Ramsay Health Care and National Health Investors 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.