Correlation Between Aristocrat Leisure and Step One
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Step One 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 Step One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure and Step One Clothing, you can compare the effects of market volatilities on Aristocrat Leisure and Step One 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 Step One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Step One.
Diversification Opportunities for Aristocrat Leisure and Step One
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Aristocrat and Step is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Step One Clothing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Step One Clothing 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 Step One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Step One Clothing has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Step One go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and Step One
Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 3.05 times less return on investment than Step One. But when comparing it to its historical volatility, Aristocrat Leisure is 3.29 times less risky than Step One. It trades about 0.11 of its potential returns per unit of risk. Step One Clothing is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 27.00 in Step One Clothing on September 1, 2024 and sell it today you would earn a total of 113.00 from holding Step One Clothing or generate 418.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aristocrat Leisure vs. Step One Clothing
Performance |
| Timeline |
| Aristocrat Leisure |
| Step One Clothing |
Aristocrat Leisure and Step One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aristocrat Leisure and Step One
The main advantage of trading using opposite Aristocrat Leisure and Step One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Step One 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 Step One will offset losses from the drop in Step One'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 |
| Step One vs. WiseTech Global Limited | Step One vs. Red Hill Iron | Step One vs. Champion Iron | Step One vs. Hutchison Telecommunications |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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