Correlation Between Ramsay Health and VULCAN MATERIALS

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

Diversification Opportunities for Ramsay Health and VULCAN MATERIALS

-0.67

Correlation Coefficient

Ramsay Health  VULCAN MATERIALS

Excellent diversification

The 3 months correlation between Ramsay and VULCAN is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ramsay Health Care and VULCAN MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VULCAN MATERIALS 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 VULCAN MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VULCAN MATERIALS has no effect on the direction of Ramsay Health i.e., Ramsay Health and VULCAN MATERIALS go up and down completely randomly.

Pair Corralation between Ramsay Health and VULCAN MATERIALS

Assuming the 90 days horizon Ramsay Health Care is expected to under-perform the VULCAN MATERIALS. But the stock apears to be less risky and, when comparing its historical volatility, Ramsay Health Care is 1.35 times less risky than VULCAN MATERIALS. The stock trades about -0.26 of its potential returns per unit of risk. The VULCAN MATERIALS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  23,756  in VULCAN MATERIALS on September 27, 2024 and sell it today you would earn a total of  1,444  from holding VULCAN MATERIALS or generate 6.08% return on investment over 90 days.

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

Ramsay Health Care  vs.  VULCAN MATERIALS

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.

VULCAN MATERIALS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VULCAN MATERIALS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VULCAN MATERIALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ramsay Health and VULCAN MATERIALS

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

The idea behind Ramsay Health Care and VULCAN MATERIALS 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 Stocks Directory module to find actively traded stocks across global markets.