Correlation Between Flowers Foods and Ramsay Health

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

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

Diversification Opportunities for Flowers Foods and Ramsay Health

0.15

Correlation Coefficient

Flowers Foods  Ramsay Health

Average diversification

The 3 months correlation between Flowers and Ramsay is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Flowers Foods 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 Flowers Foods 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 Flowers Foods 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 Flowers Foods i.e., Flowers Foods and Ramsay Health go up and down completely randomly.

Pair Corralation between Flowers Foods and Ramsay Health

Assuming the 90 days horizon Flowers Foods is expected to generate 0.55 times more return on investment than Ramsay Health. However, Flowers Foods is 1.82 times less risky than Ramsay Health. It trades about -0.12 of its potential returns per unit of risk. Ramsay Health Care is currently generating about -0.25 per unit of risk. If you would invest  2,057  in Flowers Foods on September 22, 2024 and sell it today you would lose (57.00) from holding Flowers Foods or give up 2.77% of portfolio value over 90 days.

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

Flowers Foods  vs.  Ramsay Health Care

Flowers Foods

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Flowers Foods and Ramsay Health

The main advantage of trading using opposite Flowers Foods and Ramsay Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flowers Foods 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 Flowers Foods 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .