Correlation Between Aristocrat Leisure and Retail Food
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Retail Food 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 Retail Food into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure and Retail Food Group, you can compare the effects of market volatilities on Aristocrat Leisure and Retail Food 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 Retail Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Retail Food.
Diversification Opportunities for Aristocrat Leisure and Retail Food
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aristocrat and Retail is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Retail Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Food Group 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 Retail Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Food Group has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Retail Food go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and Retail Food
Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 1.06 times less return on investment than Retail Food. But when comparing it to its historical volatility, Aristocrat Leisure is 2.45 times less risky than Retail Food. It trades about 0.43 of its potential returns per unit of risk. Retail Food Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 6.50 in Retail Food Group on September 1, 2024 and sell it today you would earn a total of 0.70 from holding Retail Food Group or generate 10.77% 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. Retail Food Group
Performance |
| Timeline |
| Aristocrat Leisure |
| Retail Food Group |
Aristocrat Leisure and Retail Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aristocrat Leisure and Retail Food
The main advantage of trading using opposite Aristocrat Leisure and Retail Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Retail Food 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 Retail Food will offset losses from the drop in Retail Food'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 |
| Retail Food vs. iShares Global Healthcare | Retail Food vs. Australian Dairy Farms | Retail Food vs. Adriatic Metals Plc | Retail Food vs. Australian Agricultural |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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