Correlation Between Carawine Resources and Aristocrat Leisure
Can any of the company-specific risk be diversified away by investing in both Carawine Resources and Aristocrat Leisure 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 Carawine Resources and Aristocrat Leisure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carawine Resources Limited and Aristocrat Leisure, you can compare the effects of market volatilities on Carawine Resources and Aristocrat Leisure 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 Carawine Resources with a short position of Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carawine Resources and Aristocrat Leisure.
Diversification Opportunities for Carawine Resources and Aristocrat Leisure
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Carawine and Aristocrat is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Carawine Resources Limited and Aristocrat Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and Carawine Resources 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 Carawine Resources Limited are associated (or correlated) with Aristocrat Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Leisure has no effect on the direction of Carawine Resources i.e., Carawine Resources and Aristocrat Leisure go up and down completely randomly.
Pair Corralation between Carawine Resources and Aristocrat Leisure
Assuming the 90 days trading horizon Carawine Resources Limited is expected to generate 2.49 times more return on investment than Aristocrat Leisure. However, Carawine Resources is 2.49 times more volatile than Aristocrat Leisure. It trades about 0.15 of its potential returns per unit of risk. Aristocrat Leisure is currently generating about 0.28 per unit of risk. If you would invest 9.10 in Carawine Resources Limited on August 29, 2024 and sell it today you would earn a total of 2.90 from holding Carawine Resources Limited or generate 31.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carawine Resources Limited vs. Aristocrat Leisure
Performance |
| Timeline |
| Carawine Resources |
| Aristocrat Leisure |
Carawine Resources and Aristocrat Leisure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carawine Resources and Aristocrat Leisure
The main advantage of trading using opposite Carawine Resources and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carawine Resources position performs unexpectedly, Aristocrat Leisure 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 Aristocrat Leisure will offset losses from the drop in Aristocrat Leisure's long position.| Carawine Resources vs. Northern Star Resources | Carawine Resources vs. Evolution Mining | Carawine Resources vs. Bluescope Steel | Carawine Resources vs. Sandfire Resources NL |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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