Correlation Between MARKET VECTR and Aristocrat Leisure

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

Diversification Opportunities for MARKET VECTR and Aristocrat Leisure

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between MARKET and Aristocrat is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding MARKET VECTR RETAIL and Aristocrat Leisure Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and MARKET VECTR 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 MARKET VECTR RETAIL 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 MARKET VECTR i.e., MARKET VECTR and Aristocrat Leisure go up and down completely randomly.

Pair Corralation between MARKET VECTR and Aristocrat Leisure

Assuming the 90 days trading horizon MARKET VECTR is expected to generate 1.83 times less return on investment than Aristocrat Leisure. But when comparing it to its historical volatility, MARKET VECTR RETAIL is 2.14 times less risky than Aristocrat Leisure. It trades about 0.1 of its potential returns per unit of risk. Aristocrat Leisure Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,148  in Aristocrat Leisure Limited on November 2, 2024 and sell it today you would earn a total of  2,092  from holding Aristocrat Leisure Limited or generate 97.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.6%
ValuesDaily Returns

MARKET VECTR RETAIL  vs.  Aristocrat Leisure Limited

 Performance 
       Timeline  
MARKET VECTR RETAIL 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in MARKET VECTR RETAIL are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, MARKET VECTR exhibited solid returns over the last few months and may actually be approaching a breakup point.
Aristocrat Leisure 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure Limited are ranked lower than 12 (%) 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.

MARKET VECTR and Aristocrat Leisure Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MARKET VECTR and Aristocrat Leisure

The main advantage of trading using opposite MARKET VECTR and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MARKET VECTR 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 MARKET VECTR RETAIL 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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