Correlation Between Aristocrat Leisure and Kip McGrath
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Kip McGrath 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 Kip McGrath into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure and Kip McGrath Education, you can compare the effects of market volatilities on Aristocrat Leisure and Kip McGrath 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 Kip McGrath. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Kip McGrath.
Diversification Opportunities for Aristocrat Leisure and Kip McGrath
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aristocrat and Kip is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Kip McGrath Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kip McGrath Education 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 Kip McGrath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kip McGrath Education has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Kip McGrath go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and Kip McGrath
Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 0.39 times more return on investment than Kip McGrath. However, Aristocrat Leisure is 2.59 times less risky than Kip McGrath. It trades about 0.14 of its potential returns per unit of risk. Kip McGrath Education is currently generating about 0.01 per unit of risk. If you would invest 3,829 in Aristocrat Leisure on August 25, 2024 and sell it today you would earn a total of 2,820 from holding Aristocrat Leisure or generate 73.65% 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. Kip McGrath Education
Performance |
| Timeline |
| Aristocrat Leisure |
| Kip McGrath Education |
Aristocrat Leisure and Kip McGrath Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aristocrat Leisure and Kip McGrath
The main advantage of trading using opposite Aristocrat Leisure and Kip McGrath positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Kip McGrath 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 Kip McGrath will offset losses from the drop in Kip McGrath's long position.| Aristocrat Leisure vs. Summit Resources Limited | Aristocrat Leisure vs. Ecofibre | Aristocrat Leisure vs. iShares Global Healthcare | Aristocrat Leisure vs. Adriatic Metals Plc |
| Kip McGrath vs. Aneka Tambang Tbk | Kip McGrath vs. BHP Group Limited | Kip McGrath vs. Rio Tinto | Kip McGrath vs. Macquarie Group Ltd |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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