Correlation Between Aristocrat Leisure and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Commonwealth Bank 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 Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure and Commonwealth Bank, you can compare the effects of market volatilities on Aristocrat Leisure and Commonwealth Bank 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 Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Commonwealth Bank.
Diversification Opportunities for Aristocrat Leisure and Commonwealth Bank
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Aristocrat and Commonwealth is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Commonwealth Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank 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 Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Commonwealth Bank go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and Commonwealth Bank
Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 1.34 times more return on investment than Commonwealth Bank. However, Aristocrat Leisure is 1.34 times more volatile than Commonwealth Bank. It trades about 0.12 of its potential returns per unit of risk. Commonwealth Bank is currently generating about 0.1 per unit of risk. If you would invest 3,003 in Aristocrat Leisure on September 12, 2024 and sell it today you would earn a total of 3,787 from holding Aristocrat Leisure or generate 126.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aristocrat Leisure vs. Commonwealth Bank
Performance |
| Timeline |
| Aristocrat Leisure |
| Commonwealth Bank |
Aristocrat Leisure and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aristocrat Leisure and Commonwealth Bank
The main advantage of trading using opposite Aristocrat Leisure and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Commonwealth Bank 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 Commonwealth Bank will offset losses from the drop in Commonwealth Bank's long position.| Aristocrat Leisure vs. Aneka Tambang Tbk | Aristocrat Leisure vs. BHP Group Limited | Aristocrat Leisure vs. Commonwealth Bank | Aristocrat Leisure vs. Commonwealth Bank of |
| Commonwealth Bank vs. Aristocrat Leisure | Commonwealth Bank vs. Hawsons Iron | Commonwealth Bank vs. Red Hill Iron | Commonwealth Bank 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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