Correlation Between VIRGIN WINES and Aristocrat Leisure

Can any of the company-specific risk be diversified away by investing in both VIRGIN WINES 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 VIRGIN WINES and Aristocrat Leisure into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VIRGIN WINES UK and Aristocrat Leisure Limited, you can compare the effects of market volatilities on VIRGIN WINES 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 VIRGIN WINES with a short position of Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of VIRGIN WINES and Aristocrat Leisure.

Diversification Opportunities for VIRGIN WINES and Aristocrat Leisure

0.0

Correlation Coefficient

VIRGIN WINES  Aristocrat Leisure

Pay attention - limited upside

The 3 months correlation between VIRGIN and Aristocrat is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding VIRGIN WINES UK and Aristocrat Leisure Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and VIRGIN WINES 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 VIRGIN WINES UK 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 VIRGIN WINES i.e., VIRGIN WINES and Aristocrat Leisure go up and down completely randomly.

Pair Corralation between VIRGIN WINES and Aristocrat Leisure

If you would invest  1,958  in Aristocrat Leisure Limited on October 11, 2024 and sell it today you would earn a total of  2,242  from holding Aristocrat Leisure Limited or generate 114.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

VIRGIN WINES UK  vs.  Aristocrat Leisure Limited

VIRGIN WINES UK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VIRGIN WINES UK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VIRGIN WINES is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Aristocrat Leisure

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure Limited are ranked lower than 17 (%) 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.

Pair Trading with VIRGIN WINES and Aristocrat Leisure

The main advantage of trading using opposite VIRGIN WINES and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VIRGIN WINES 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 VIRGIN WINES UK 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.