Correlation Between National Australia and Aristocrat Leisure
Can any of the company-specific risk be diversified away by investing in both National Australia 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 National Australia and Aristocrat Leisure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Australia Bank and Aristocrat Leisure, you can compare the effects of market volatilities on National Australia 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 National Australia with a short position of Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Aristocrat Leisure.
Diversification Opportunities for National Australia and Aristocrat Leisure
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Aristocrat is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Aristocrat Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and National Australia 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 National Australia Bank 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 National Australia i.e., National Australia and Aristocrat Leisure go up and down completely randomly.
Pair Corralation between National Australia and Aristocrat Leisure
Assuming the 90 days trading horizon National Australia is expected to generate 16.12 times less return on investment than Aristocrat Leisure. But when comparing it to its historical volatility, National Australia Bank is 11.99 times less risky than Aristocrat Leisure. It trades about 0.13 of its potential returns per unit of risk. Aristocrat Leisure is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 7,185 in Aristocrat Leisure on November 27, 2024 and sell it today you would earn a total of 456.00 from holding Aristocrat Leisure or generate 6.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Australia Bank vs. Aristocrat Leisure
Performance |
| Timeline |
| National Australia Bank |
| Aristocrat Leisure |
National Australia and Aristocrat Leisure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Aristocrat Leisure
The main advantage of trading using opposite National Australia and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia 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.| National Australia vs. Resolute Mining | National Australia vs. Andean Silver Limited | National Australia vs. ABACUS STORAGE KING | National Australia vs. Sun Silver Limited |
| Aristocrat Leisure vs. Flagship Investments | Aristocrat Leisure vs. Mirrabooka Investments | Aristocrat Leisure vs. Olympio Metals | Aristocrat Leisure vs. Falcon Metals |
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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