Correlation Between Macquarie Bank and Aristocrat Leisure
Can any of the company-specific risk be diversified away by investing in both Macquarie Bank 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 Macquarie Bank and Aristocrat Leisure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macquarie Bank Limited and Aristocrat Leisure, you can compare the effects of market volatilities on Macquarie Bank 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 Macquarie Bank with a short position of Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie Bank and Aristocrat Leisure.
Diversification Opportunities for Macquarie Bank and Aristocrat Leisure
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Macquarie and Aristocrat is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Bank Limited and Aristocrat Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and Macquarie Bank 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 Macquarie Bank 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 Macquarie Bank i.e., Macquarie Bank and Aristocrat Leisure go up and down completely randomly.
Pair Corralation between Macquarie Bank and Aristocrat Leisure
Assuming the 90 days trading horizon Macquarie Bank is expected to generate 6.8 times less return on investment than Aristocrat Leisure. But when comparing it to its historical volatility, Macquarie Bank Limited is 3.09 times less risky than Aristocrat Leisure. It trades about 0.06 of its potential returns per unit of risk. Aristocrat Leisure is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,022 in Aristocrat Leisure on September 25, 2024 and sell it today you would earn a total of 3,854 from holding Aristocrat Leisure or generate 127.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Macquarie Bank Limited vs. Aristocrat Leisure
Performance |
| Timeline |
| Macquarie Bank |
| Aristocrat Leisure |
Macquarie Bank and Aristocrat Leisure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macquarie Bank and Aristocrat Leisure
The main advantage of trading using opposite Macquarie Bank and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie Bank 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.| Macquarie Bank vs. Black Rock Mining | Macquarie Bank vs. Duketon Mining | Macquarie Bank vs. Andean Silver Limited | Macquarie Bank vs. Perseus Mining |
| Aristocrat Leisure vs. Carlton Investments | Aristocrat Leisure vs. Charter Hall Retail | Aristocrat Leisure vs. Hutchison Telecommunications | Aristocrat Leisure vs. REGAL ASIAN 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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