Correlation Between ARISTOCRAT LEISURE and China DatangRenewable
Can any of the company-specific risk be diversified away by investing in both ARISTOCRAT LEISURE and China DatangRenewable 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 China DatangRenewable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARISTOCRAT LEISURE and China Datang, you can compare the effects of market volatilities on ARISTOCRAT LEISURE and China DatangRenewable 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 China DatangRenewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARISTOCRAT LEISURE and China DatangRenewable.
Diversification Opportunities for ARISTOCRAT LEISURE and China DatangRenewable
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ARISTOCRAT and China is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding ARISTOCRAT LEISURE and China Datang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China DatangRenewable 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 China DatangRenewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China DatangRenewable has no effect on the direction of ARISTOCRAT LEISURE i.e., ARISTOCRAT LEISURE and China DatangRenewable go up and down completely randomly.
Pair Corralation between ARISTOCRAT LEISURE and China DatangRenewable
Assuming the 90 days trading horizon ARISTOCRAT LEISURE is expected to generate 0.39 times more return on investment than China DatangRenewable. However, ARISTOCRAT LEISURE is 2.56 times less risky than China DatangRenewable. It trades about 0.19 of its potential returns per unit of risk. China Datang is currently generating about 0.01 per unit of risk. If you would invest 4,140 in ARISTOCRAT LEISURE on October 11, 2024 and sell it today you would earn a total of 140.00 from holding ARISTOCRAT LEISURE or generate 3.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
ARISTOCRAT LEISURE vs. China Datang
Performance |
| Timeline |
| ARISTOCRAT LEISURE |
| China DatangRenewable |
ARISTOCRAT LEISURE and China DatangRenewable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARISTOCRAT LEISURE and China DatangRenewable
The main advantage of trading using opposite ARISTOCRAT LEISURE and China DatangRenewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARISTOCRAT LEISURE position performs unexpectedly, China DatangRenewable 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 China DatangRenewable will offset losses from the drop in China DatangRenewable's long position.| ARISTOCRAT LEISURE vs. TITAN MACHINERY | ARISTOCRAT LEISURE vs. Dairy Farm International | ARISTOCRAT LEISURE vs. WIMFARM SA EO | ARISTOCRAT LEISURE vs. Sumitomo Mitsui Construction |
| China DatangRenewable vs. Planet Fitness | China DatangRenewable vs. US Physical Therapy | China DatangRenewable vs. CLOVER HEALTH INV | China DatangRenewable vs. Tencent Music Entertainment |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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