Correlation Between Energy Resources and Aristocrat Leisure
Can any of the company-specific risk be diversified away by investing in both Energy 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 Energy 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 Energy Resources and Aristocrat Leisure, you can compare the effects of market volatilities on Energy 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 Energy Resources with a short position of Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Resources and Aristocrat Leisure.
Diversification Opportunities for Energy Resources and Aristocrat Leisure
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Energy and Aristocrat is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Energy Resources and Aristocrat Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and Energy 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 Energy Resources 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 Energy Resources i.e., Energy Resources and Aristocrat Leisure go up and down completely randomly.
Pair Corralation between Energy Resources and Aristocrat Leisure
Assuming the 90 days trading horizon Energy Resources is expected to generate 22.75 times more return on investment than Aristocrat Leisure. However, Energy Resources is 22.75 times more volatile than Aristocrat Leisure. It trades about 0.08 of its potential returns per unit of risk. Aristocrat Leisure is currently generating about 0.13 per unit of risk. If you would invest 0.30 in Energy Resources on September 13, 2024 and sell it today you would lose (0.10) from holding Energy Resources or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Resources vs. Aristocrat Leisure
Performance |
| Timeline |
| Energy Resources |
| Aristocrat Leisure |
Energy Resources and Aristocrat Leisure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Resources and Aristocrat Leisure
The main advantage of trading using opposite Energy Resources and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy 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.| Energy Resources vs. Perseus Mining | Energy Resources vs. K2 Asset Management | Energy Resources vs. Carlton Investments | Energy Resources vs. Pinnacle Investment Management |
| Aristocrat Leisure vs. Energy Resources | Aristocrat Leisure vs. 88 Energy | Aristocrat Leisure vs. Amani Gold | Aristocrat Leisure vs. A1 Investments Resources |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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