Correlation Between Aristocrat Leisure and Sandfire Resources
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Sandfire Resources 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 Sandfire Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure and Sandfire Resources NL, you can compare the effects of market volatilities on Aristocrat Leisure and Sandfire Resources 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 Sandfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Sandfire Resources.
Diversification Opportunities for Aristocrat Leisure and Sandfire Resources
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Aristocrat and Sandfire is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Sandfire Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources 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 Sandfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandfire Resources has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Sandfire Resources go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and Sandfire Resources
Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 0.72 times more return on investment than Sandfire Resources. However, Aristocrat Leisure is 1.38 times less risky than Sandfire Resources. It trades about 0.09 of its potential returns per unit of risk. Sandfire Resources NL is currently generating about 0.01 per unit of risk. If you would invest 6,676 in Aristocrat Leisure on September 15, 2024 and sell it today you would earn a total of 162.00 from holding Aristocrat Leisure or generate 2.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aristocrat Leisure vs. Sandfire Resources NL
Performance |
| Timeline |
| Aristocrat Leisure |
| Sandfire Resources |
Aristocrat Leisure and Sandfire Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aristocrat Leisure and Sandfire Resources
The main advantage of trading using opposite Aristocrat Leisure and Sandfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Sandfire Resources 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 Sandfire Resources will offset losses from the drop in Sandfire Resources' long position.| Aristocrat Leisure vs. Lendlease Group | Aristocrat Leisure vs. Carlton Investments | Aristocrat Leisure vs. MFF Capital Investments | Aristocrat Leisure vs. Super Retail Group |
| Sandfire Resources vs. Premier Investments | Sandfire Resources vs. Aristocrat Leisure | Sandfire Resources vs. Alternative Investment Trust | Sandfire Resources vs. Australian Unity Office |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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