Correlation Between Harvey Norman and Aristocrat Leisure
Can any of the company-specific risk be diversified away by investing in both Harvey Norman 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 Harvey Norman and Aristocrat Leisure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Harvey Norman Holdings and Aristocrat Leisure, you can compare the effects of market volatilities on Harvey Norman 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 Harvey Norman with a short position of Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harvey Norman and Aristocrat Leisure.
Diversification Opportunities for Harvey Norman and Aristocrat Leisure
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Harvey and Aristocrat is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Harvey Norman Holdings and Aristocrat Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and Harvey Norman 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 Harvey Norman Holdings 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 Harvey Norman i.e., Harvey Norman and Aristocrat Leisure go up and down completely randomly.
Pair Corralation between Harvey Norman and Aristocrat Leisure
Assuming the 90 days trading horizon Harvey Norman is expected to generate 2.66 times less return on investment than Aristocrat Leisure. In addition to that, Harvey Norman is 1.03 times more volatile than Aristocrat Leisure. It trades about 0.04 of its total potential returns per unit of risk. Aristocrat Leisure is currently generating about 0.12 per unit of volatility. If you would invest 2,983 in Aristocrat Leisure on September 13, 2024 and sell it today you would earn a total of 3,720 from holding Aristocrat Leisure or generate 124.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Harvey Norman Holdings vs. Aristocrat Leisure
Performance |
| Timeline |
| Harvey Norman Holdings |
| Aristocrat Leisure |
Harvey Norman and Aristocrat Leisure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Harvey Norman and Aristocrat Leisure
The main advantage of trading using opposite Harvey Norman and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harvey Norman 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.| Harvey Norman vs. Aristocrat Leisure | Harvey Norman vs. Carlton Investments | Harvey Norman vs. Clime Investment Management | Harvey Norman vs. Alternative Investment Trust |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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