Correlation Between Aristocrat Leisure and Brambles
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Brambles 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 Brambles into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure and Brambles, you can compare the effects of market volatilities on Aristocrat Leisure and Brambles 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 Brambles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Brambles.
Diversification Opportunities for Aristocrat Leisure and Brambles
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aristocrat and Brambles is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Brambles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brambles 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 Brambles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brambles has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Brambles go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and Brambles
Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 1.04 times more return on investment than Brambles. However, Aristocrat Leisure is 1.04 times more volatile than Brambles. It trades about 0.16 of its potential returns per unit of risk. Brambles is currently generating about 0.12 per unit of risk. If you would invest 3,901 in Aristocrat Leisure on September 2, 2024 and sell it today you would earn a total of 2,874 from holding Aristocrat Leisure or generate 73.67% 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. Brambles
Performance |
| Timeline |
| Aristocrat Leisure |
| Brambles |
Aristocrat Leisure and Brambles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aristocrat Leisure and Brambles
The main advantage of trading using opposite Aristocrat Leisure and Brambles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Brambles 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 Brambles will offset losses from the drop in Brambles' long position.| Aristocrat Leisure vs. M3 Mining | Aristocrat Leisure vs. Aspire Mining | Aristocrat Leisure vs. Charter Hall Retail | Aristocrat Leisure vs. Bluescope Steel |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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