Correlation Between Insurance Australia and Ramsay Health

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

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

Diversification Opportunities for Insurance Australia and Ramsay Health

0.58

Correlation Coefficient

Insurance Australia  Ramsay Health

Very weak diversification

The 3 months correlation between Insurance and Ramsay is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group 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 Insurance Australia 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 Insurance Australia Group 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 Insurance Australia i.e., Insurance Australia and Ramsay Health go up and down completely randomly.

Pair Corralation between Insurance Australia and Ramsay Health

Assuming the 90 days trading horizon Insurance Australia Group is expected to generate 5.53 times more return on investment than Ramsay Health. However, Insurance Australia is 5.53 times more volatile than Ramsay Health Care. It trades about 0.18 of its potential returns per unit of risk. Ramsay Health Care is currently generating about 0.15 per unit of risk. If you would invest  741.00  in Insurance Australia Group on September 26, 2024 and sell it today you would earn a total of  109.00  from holding Insurance Australia Group or generate 14.71% return on investment over 90 days.

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

Insurance Australia Group  vs.  Ramsay Health Care

Insurance Australia

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Insurance Australia Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Insurance Australia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ramsay Health Care

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ramsay Health Care are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ramsay Health is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Insurance Australia and Ramsay Health

The main advantage of trading using opposite Insurance Australia and Ramsay Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia 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 Insurance Australia Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.