Correlation Between Aristocrat Leisure and Bank of America
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Bank of America 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 Aristocrat Leisure and Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure Limited and Verizon Communications, you can compare the effects of market volatilities on Aristocrat Leisure and Bank of America 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 Aristocrat Leisure with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Bank of America.
Diversification Opportunities for Aristocrat Leisure and Bank of America
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Aristocrat and Bank is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure Limited and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Aristocrat Leisure 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 Aristocrat Leisure Limited are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Bank of America go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and Bank of America
Assuming the 90 days horizon Aristocrat Leisure Limited is expected to generate 1.25 times more return on investment than Bank of America. However, Aristocrat Leisure is 1.25 times more volatile than Verizon Communications. It trades about 0.09 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.03 per unit of risk. If you would invest 2,187 in Aristocrat Leisure Limited on November 5, 2024 and sell it today you would earn a total of 2,313 from holding Aristocrat Leisure Limited or generate 105.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aristocrat Leisure Limited vs. Verizon Communications
Performance |
| Timeline |
| Aristocrat Leisure |
| Verizon Communications |
Aristocrat Leisure and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aristocrat Leisure and Bank of America
The main advantage of trading using opposite Aristocrat Leisure and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Aristocrat Leisure vs. AECOM TECHNOLOGY | Aristocrat Leisure vs. Scottish Mortgage Investment | Aristocrat Leisure vs. X FAB Silicon Foundries | Aristocrat Leisure vs. HK Electric Investments |
| Bank of America vs. REVO INSURANCE SPA | Bank of America vs. HANOVER INSURANCE | Bank of America vs. SUN LIFE FINANCIAL | Bank of America vs. Webster Financial |
Check out your portfolio center.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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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