Correlation Between Aristocrat Leisure and SOCO
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and SOCO 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 SOCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure and SOCO Corporation, you can compare the effects of market volatilities on Aristocrat Leisure and SOCO 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 SOCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and SOCO.
Diversification Opportunities for Aristocrat Leisure and SOCO
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aristocrat and SOCO is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and SOCO Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOCO 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 SOCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOCO has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and SOCO go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and SOCO
Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 3.0 times less return on investment than SOCO. But when comparing it to its historical volatility, Aristocrat Leisure is 5.41 times less risky than SOCO. It trades about 0.43 of its potential returns per unit of risk. SOCO Corporation is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 9.10 in SOCO Corporation on September 2, 2024 and sell it today you would earn a total of 2.90 from holding SOCO Corporation or generate 31.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aristocrat Leisure vs. SOCO Corp.
Performance |
| Timeline |
| Aristocrat Leisure |
| SOCO |
Aristocrat Leisure and SOCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aristocrat Leisure and SOCO
The main advantage of trading using opposite Aristocrat Leisure and SOCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, SOCO 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 SOCO will offset losses from the drop in SOCO's long position.| Aristocrat Leisure vs. M3 Mining | Aristocrat Leisure vs. Aspire Mining | Aristocrat Leisure vs. Charter Hall Retail | Aristocrat Leisure vs. Bluescope Steel |
| SOCO vs. Aristocrat Leisure | SOCO vs. Pinnacle Investment Management | SOCO vs. A1 Investments Resources | SOCO vs. Hotel Property Investments |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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