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
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and Aristocrat is 0.52. 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 175.58 times less return on investment than Aristocrat Leisure. But when comparing it to its historical volatility, National Australia Bank is 8.53 times less risky than Aristocrat Leisure. It trades about 0.01 of its potential returns per unit of risk. Aristocrat Leisure is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 6,937 in Aristocrat Leisure on November 4, 2024 and sell it today you would earn a total of 620.00 from holding Aristocrat Leisure or generate 8.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| 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. Centaurus Metals | National Australia vs. Macquarie Technology Group | National Australia vs. 29Metals | National Australia vs. MetalsGrove Mining |
| Aristocrat Leisure vs. Insignia Financial | Aristocrat Leisure vs. Macquarie Bank Limited | Aristocrat Leisure vs. National Australia Bank | Aristocrat Leisure vs. Queste Communications |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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