Correlation Between Aristocrat Leisure and Regal Investment
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Regal Investment 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 Regal Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure and Regal Investment, you can compare the effects of market volatilities on Aristocrat Leisure and Regal Investment 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 Regal Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Regal Investment.
Diversification Opportunities for Aristocrat Leisure and Regal Investment
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aristocrat and Regal is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Regal Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regal Investment 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 Regal Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regal Investment has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Regal Investment go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and Regal Investment
Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 1.04 times more return on investment than Regal Investment. However, Aristocrat Leisure is 1.04 times more volatile than Regal Investment. It trades about 0.25 of its potential returns per unit of risk. Regal Investment is currently generating about 0.05 per unit of risk. If you would invest 4,499 in Aristocrat Leisure on September 1, 2024 and sell it today you would earn a total of 2,276 from holding Aristocrat Leisure or generate 50.59% 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. Regal Investment
Performance |
Timeline |
Aristocrat Leisure |
Regal Investment |
Aristocrat Leisure and Regal Investment Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Aristocrat Leisure and Regal Investment
The main advantage of trading using opposite Aristocrat Leisure and Regal Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Regal Investment 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 Regal Investment will offset losses from the drop in Regal Investment's long position.Aristocrat Leisure vs. iShares Global Healthcare | Aristocrat Leisure vs. Australian Dairy Farms | Aristocrat Leisure vs. Adriatic Metals Plc | Aristocrat Leisure vs. Australian Agricultural |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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