Correlation Between MFF Capital and Aristocrat Leisure
Can any of the company-specific risk be diversified away by investing in both MFF Capital 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 MFF Capital and Aristocrat Leisure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFF Capital Investments and Aristocrat Leisure, you can compare the effects of market volatilities on MFF Capital 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 MFF Capital with a short position of Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFF Capital and Aristocrat Leisure.
Diversification Opportunities for MFF Capital and Aristocrat Leisure
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between MFF and Aristocrat is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding MFF Capital Investments and Aristocrat Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and MFF Capital 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 MFF Capital Investments 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 MFF Capital i.e., MFF Capital and Aristocrat Leisure go up and down completely randomly.
Pair Corralation between MFF Capital and Aristocrat Leisure
Assuming the 90 days trading horizon MFF Capital Investments is expected to generate 1.1 times more return on investment than Aristocrat Leisure. However, MFF Capital is 1.1 times more volatile than Aristocrat Leisure. It trades about 0.24 of its potential returns per unit of risk. Aristocrat Leisure is currently generating about 0.09 per unit of risk. If you would invest 428.00 in MFF Capital Investments on September 15, 2024 and sell it today you would earn a total of 33.00 from holding MFF Capital Investments or generate 7.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MFF Capital Investments vs. Aristocrat Leisure
Performance |
| Timeline |
| MFF Capital Investments |
| Aristocrat Leisure |
MFF Capital and Aristocrat Leisure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFF Capital and Aristocrat Leisure
The main advantage of trading using opposite MFF Capital and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFF Capital 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.| MFF Capital vs. Australian Foundation Investment | MFF Capital vs. Metrics Master Income | MFF Capital vs. L1 Long Short | MFF Capital vs. Wam Leaders |
| Aristocrat Leisure vs. Lendlease Group | Aristocrat Leisure vs. Carlton Investments | Aristocrat Leisure vs. MFF Capital Investments | Aristocrat Leisure vs. Super Retail Group |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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