Correlation Between Aristocrat Leisure and BKI Investment
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and BKI Investment 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 BKI Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure and BKI Investment, you can compare the effects of market volatilities on Aristocrat Leisure and BKI Investment 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 BKI Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and BKI Investment.
Diversification Opportunities for Aristocrat Leisure and BKI Investment
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aristocrat and BKI is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and BKI Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKI Investment 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 BKI Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BKI Investment has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and BKI Investment go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and BKI Investment
Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 1.75 times more return on investment than BKI Investment. However, Aristocrat Leisure is 1.75 times more volatile than BKI Investment. It trades about 0.11 of its potential returns per unit of risk. BKI Investment is currently generating about 0.02 per unit of risk. If you would invest 3,278 in Aristocrat Leisure on September 3, 2024 and sell it today you would earn a total of 3,541 from holding Aristocrat Leisure or generate 108.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aristocrat Leisure vs. BKI Investment
Performance |
| Timeline |
| Aristocrat Leisure |
| BKI Investment |
Aristocrat Leisure and BKI Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aristocrat Leisure and BKI Investment
The main advantage of trading using opposite Aristocrat Leisure and BKI Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, BKI Investment 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 BKI Investment will offset losses from the drop in BKI Investment's long position.| Aristocrat Leisure vs. Westpac Banking | Aristocrat Leisure vs. Champion Iron | Aristocrat Leisure vs. iShares Global Healthcare | Aristocrat Leisure vs. Peel Mining |
| BKI Investment vs. Mount Gibson Iron | BKI Investment vs. Alto Metals | BKI Investment vs. Aurelia Metals | BKI Investment vs. Legacy Iron Ore |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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