Correlation Between Ramsay Health and CareRx

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

Diversification Opportunities for Ramsay Health and CareRx

0.15

Correlation Coefficient

Ramsay Health  CareRx

Average diversification

The 3 months correlation between Ramsay and CareRx is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ramsay Health Care and CareRx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRx 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 CareRx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRx has no effect on the direction of Ramsay Health i.e., Ramsay Health and CareRx go up and down completely randomly.

Pair Corralation between Ramsay Health and CareRx

Assuming the 90 days horizon Ramsay Health Care is expected to under-perform the CareRx. In addition to that, Ramsay Health is 1.1 times more volatile than CareRx. It trades about -0.03 of its total potential returns per unit of risk. CareRx is currently generating about 0.03 per unit of volatility. If you would invest  131.00  in CareRx on October 24, 2024 and sell it today you would earn a total of  19.00  from holding CareRx or generate 14.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.8%
Values	Daily Returns

Ramsay Health Care  vs.  CareRx

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 fragile performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

CareRx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CareRx has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, CareRx is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ramsay Health and CareRx

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

The idea behind Ramsay Health Care and CareRx 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.