Correlation Between Aristocrat Leisure and Collins Foods
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Collins Foods 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 Collins Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure and Collins Foods, you can compare the effects of market volatilities on Aristocrat Leisure and Collins Foods 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 Collins Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Collins Foods.
Diversification Opportunities for Aristocrat Leisure and Collins Foods
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Aristocrat and Collins is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Collins Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods 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 Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Collins Foods go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and Collins Foods
Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 0.72 times more return on investment than Collins Foods. However, Aristocrat Leisure is 1.39 times less risky than Collins Foods. It trades about 0.12 of its potential returns per unit of risk. Collins Foods is currently generating about 0.02 per unit of risk. If you would invest 3,669 in Aristocrat Leisure on August 31, 2024 and sell it today you would earn a total of 3,106 from holding Aristocrat Leisure or generate 84.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aristocrat Leisure vs. Collins Foods
Performance |
| Timeline |
| Aristocrat Leisure |
| Collins Foods |
Aristocrat Leisure and Collins Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aristocrat Leisure and Collins Foods
The main advantage of trading using opposite Aristocrat Leisure and Collins Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Collins Foods 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 Collins Foods will offset losses from the drop in Collins Foods' long position.| Aristocrat Leisure vs. Microequities Asset Management | Aristocrat Leisure vs. Super Retail Group | Aristocrat Leisure vs. Iron Road | Aristocrat Leisure vs. Vulcan Steel |
| Collins Foods vs. Aneka Tambang Tbk | Collins Foods vs. Unibail Rodamco Westfield SE | Collins Foods vs. Macquarie Group | Collins Foods vs. Commonwealth Bank |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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