Correlation Between Aristocrat Leisure and Australia
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Australia 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 Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure and Australia and New, you can compare the effects of market volatilities on Aristocrat Leisure and Australia 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 Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Australia.
Diversification Opportunities for Aristocrat Leisure and Australia
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aristocrat and Australia is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Australia and New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australia and New 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 Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australia and New has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Australia go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and Australia
Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 1.38 times more return on investment than Australia. However, Aristocrat Leisure is 1.38 times more volatile than Australia and New. It trades about 0.12 of its potential returns per unit of risk. Australia and New is currently generating about 0.07 per unit of risk. If you would invest 2,983 in Aristocrat Leisure on September 13, 2024 and sell it today you would earn a total of 3,720 from holding Aristocrat Leisure or generate 124.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aristocrat Leisure vs. Australia and New
Performance |
| Timeline |
| Aristocrat Leisure |
| Australia and New |
Aristocrat Leisure and Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aristocrat Leisure and Australia
The main advantage of trading using opposite Aristocrat Leisure and Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Australia 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 Australia will offset losses from the drop in Australia's long position.| Aristocrat Leisure vs. Energy Resources | Aristocrat Leisure vs. 88 Energy | Aristocrat Leisure vs. Amani Gold | Aristocrat Leisure vs. A1 Investments Resources |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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