Correlation Between Aristocrat Leisure and Metro Mining
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Metro Mining 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 Metro Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure and Metro Mining, you can compare the effects of market volatilities on Aristocrat Leisure and Metro Mining 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 Metro Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Metro Mining.
Diversification Opportunities for Aristocrat Leisure and Metro Mining
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aristocrat and Metro is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Metro Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Mining 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 Metro Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Mining has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Metro Mining go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and Metro Mining
Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 8.02 times less return on investment than Metro Mining. But when comparing it to its historical volatility, Aristocrat Leisure is 2.72 times less risky than Metro Mining. It trades about 0.09 of its potential returns per unit of risk. Metro Mining is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 4.70 in Metro Mining on September 15, 2024 and sell it today you would earn a total of 1.00 from holding Metro Mining or generate 21.28% 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. Metro Mining
Performance |
| Timeline |
| Aristocrat Leisure |
| Metro Mining |
Aristocrat Leisure and Metro Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aristocrat Leisure and Metro Mining
The main advantage of trading using opposite Aristocrat Leisure and Metro Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Metro Mining 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 Metro Mining will offset losses from the drop in Metro Mining's long position.| Aristocrat Leisure vs. Lendlease Group | Aristocrat Leisure vs. Carlton Investments | Aristocrat Leisure vs. MFF Capital Investments | Aristocrat Leisure vs. Super Retail Group |
| Metro Mining vs. Northern Star Resources | Metro Mining vs. Evolution Mining | Metro Mining vs. Bluescope Steel | Metro Mining vs. Sandfire Resources NL |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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