Correlation Between Aristocrat Leisure and Australian Strategic
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Australian Strategic 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 Australian Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure and Australian Strategic Materials, you can compare the effects of market volatilities on Aristocrat Leisure and Australian Strategic 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 Australian Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Australian Strategic.
Diversification Opportunities for Aristocrat Leisure and Australian Strategic
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Aristocrat and Australian is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Australian Strategic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Strategic 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 Australian Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Strategic has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Australian Strategic go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and Australian Strategic
Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 0.3 times more return on investment than Australian Strategic. However, Aristocrat Leisure is 3.35 times less risky than Australian Strategic. It trades about 0.12 of its potential returns per unit of risk. Australian Strategic Materials is currently generating about -0.02 per unit of risk. If you would invest 3,451 in Aristocrat Leisure on November 1, 2024 and sell it today you would earn a total of 3,948 from holding Aristocrat Leisure or generate 114.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Aristocrat Leisure vs. Australian Strategic Materials
Performance |
Timeline |
Aristocrat Leisure |
Australian Strategic |
Aristocrat Leisure and Australian Strategic Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Aristocrat Leisure and Australian Strategic
The main advantage of trading using opposite Aristocrat Leisure and Australian Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Australian Strategic 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 Australian Strategic will offset losses from the drop in Australian Strategic's long position.Aristocrat Leisure vs. Sky Metals | Aristocrat Leisure vs. Data3 | Aristocrat Leisure vs. Kneomedia | Aristocrat Leisure vs. Dalaroo Metals |
Australian Strategic vs. Regis Healthcare | Australian Strategic vs. AiMedia Technologies | Australian Strategic vs. Spirit Telecom | Australian Strategic vs. Autosports Group |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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