Correlation Between Visa and Aristocrat Leisure

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Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Aristocrat Leisure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Aristocrat Leisure Limited, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Aristocrat Leisure.

Diversification Opportunities for Visa and Aristocrat Leisure

VisaAristocratDiversified AwayVisaAristocratDiversified Away100%
0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Visa and Aristocrat is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Aristocrat Leisure Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and Visa 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 Visa Class A 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 Visa i.e., Visa and Aristocrat Leisure go up and down completely randomly.

Pair Corralation between Visa and Aristocrat Leisure

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.31 times more return on investment than Aristocrat Leisure. However, Visa Class A is 3.18 times less risky than Aristocrat Leisure. It trades about 0.41 of its potential returns per unit of risk. Aristocrat Leisure Limited is currently generating about 0.04 per unit of risk. If you would invest  32,302  in Visa Class A on November 23, 2024 and sell it today you would earn a total of  2,551  from holding Visa Class A or generate 7.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Visa Class A  vs.  Aristocrat Leisure Limited

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -505101520
JavaScript chart by amCharts 3.21.15V ARLUF
       Timeline  
Visa Class A 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb310320330340350
Aristocrat Leisure 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aristocrat Leisure reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanFebDecJanFeb404244464850

Visa and Aristocrat Leisure Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.71-2.03-1.35-0.670.01130.761.522.283.04 0.10.20.30.4
JavaScript chart by amCharts 3.21.15V ARLUF
       Returns  

Pair Trading with Visa and Aristocrat Leisure

The main advantage of trading using opposite Visa and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.
The idea behind Visa Class A and Aristocrat Leisure Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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