Correlation Between Aristocrat Leisure and Nufarm Finance
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Nufarm Finance 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 Nufarm Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure and Nufarm Finance NZ, you can compare the effects of market volatilities on Aristocrat Leisure and Nufarm Finance 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 Nufarm Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Nufarm Finance.
Diversification Opportunities for Aristocrat Leisure and Nufarm Finance
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aristocrat and Nufarm is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Nufarm Finance NZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Finance NZ 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 Nufarm Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Finance NZ has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Nufarm Finance go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and Nufarm Finance
Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 1.92 times more return on investment than Nufarm Finance. However, Aristocrat Leisure is 1.92 times more volatile than Nufarm Finance NZ. It trades about 0.44 of its potential returns per unit of risk. Nufarm Finance NZ is currently generating about 0.26 per unit of risk. If you would invest 6,109 in Aristocrat Leisure on August 31, 2024 and sell it today you would earn a total of 678.00 from holding Aristocrat Leisure or generate 11.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Aristocrat Leisure vs. Nufarm Finance NZ
Performance |
| Timeline |
| Aristocrat Leisure |
| Nufarm Finance NZ |
Aristocrat Leisure and Nufarm Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aristocrat Leisure and Nufarm Finance
The main advantage of trading using opposite Aristocrat Leisure and Nufarm Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Nufarm Finance 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 Nufarm Finance will offset losses from the drop in Nufarm Finance's long position.| Aristocrat Leisure vs. Microequities Asset Management | Aristocrat Leisure vs. Super Retail Group | Aristocrat Leisure vs. Iron Road | Aristocrat Leisure vs. Vulcan Steel |
| Nufarm Finance vs. Ecofibre | Nufarm Finance vs. iShares Global Healthcare | Nufarm Finance vs. Ridley | Nufarm Finance vs. Australian Dairy Farms |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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