Correlation Between ARISTOCRAT LEISURE and MACOM Technology
Can any of the company-specific risk be diversified away by investing in both ARISTOCRAT LEISURE and MACOM Technology 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 MACOM Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARISTOCRAT LEISURE and MACOM Technology Solutions, you can compare the effects of market volatilities on ARISTOCRAT LEISURE and MACOM Technology 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 MACOM Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARISTOCRAT LEISURE and MACOM Technology.
Diversification Opportunities for ARISTOCRAT LEISURE and MACOM Technology
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ARISTOCRAT and MACOM is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding ARISTOCRAT LEISURE and MACOM Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACOM Technology Sol 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 are associated (or correlated) with MACOM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACOM Technology Sol has no effect on the direction of ARISTOCRAT LEISURE i.e., ARISTOCRAT LEISURE and MACOM Technology go up and down completely randomly.
Pair Corralation between ARISTOCRAT LEISURE and MACOM Technology
Assuming the 90 days trading horizon ARISTOCRAT LEISURE is expected to generate 1.38 times less return on investment than MACOM Technology. But when comparing it to its historical volatility, ARISTOCRAT LEISURE is 4.09 times less risky than MACOM Technology. It trades about 0.66 of its potential returns per unit of risk. MACOM Technology Solutions is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 10,800 in MACOM Technology Solutions on August 28, 2024 and sell it today you would earn a total of 2,000 from holding MACOM Technology Solutions or generate 18.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARISTOCRAT LEISURE vs. MACOM Technology Solutions
Performance |
| Timeline |
| ARISTOCRAT LEISURE |
| MACOM Technology Sol |
ARISTOCRAT LEISURE and MACOM Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARISTOCRAT LEISURE and MACOM Technology
The main advantage of trading using opposite ARISTOCRAT LEISURE and MACOM Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARISTOCRAT LEISURE position performs unexpectedly, MACOM Technology 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 MACOM Technology will offset losses from the drop in MACOM Technology's long position.| ARISTOCRAT LEISURE vs. Apple Inc | ARISTOCRAT LEISURE vs. Apple Inc | ARISTOCRAT LEISURE vs. Apple Inc | ARISTOCRAT LEISURE vs. Microsoft |
| MACOM Technology vs. Astral Foods Limited | MACOM Technology vs. TYSON FOODS A | MACOM Technology vs. AUSNUTRIA DAIRY | MACOM Technology vs. EMBARK EDUCATION LTD |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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