Correlation Between Aristocrat Leisure and CHRYSALIS INVESTMENTS

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

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

Diversification Opportunities for Aristocrat Leisure and CHRYSALIS INVESTMENTS

0.75

Correlation Coefficient

Aristocrat Leisure  CHRYSALIS INVESTMENTS

Poor diversification

The 3 months correlation between Aristocrat and CHRYSALIS is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure Limited and CHRYSALIS INVESTMENTS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHRYSALIS INVESTMENTS LTD and Aristocrat Leisure 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 Aristocrat Leisure Limited are associated (or correlated) with CHRYSALIS INVESTMENTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHRYSALIS INVESTMENTS LTD has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and CHRYSALIS INVESTMENTS go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and CHRYSALIS INVESTMENTS

Assuming the 90 days horizon Aristocrat Leisure Limited is expected to generate 0.79 times more return on investment than CHRYSALIS INVESTMENTS. However, Aristocrat Leisure Limited is 1.27 times less risky than CHRYSALIS INVESTMENTS. It trades about 0.19 of its potential returns per unit of risk. CHRYSALIS INVESTMENTS LTD is currently generating about 0.07 per unit of risk. If you would invest  3,603  in Aristocrat Leisure Limited on October 26, 2024 and sell it today you would earn a total of  557.00  from holding Aristocrat Leisure Limited or generate 15.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Aristocrat Leisure Limited  vs.  CHRYSALIS INVESTMENTS LTD

Aristocrat Leisure

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure Limited are ranked lower than 14 (%) 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.

CHRYSALIS INVESTMENTS LTD

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHRYSALIS INVESTMENTS LTD are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHRYSALIS INVESTMENTS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Aristocrat Leisure and CHRYSALIS INVESTMENTS

The main advantage of trading using opposite Aristocrat Leisure and CHRYSALIS INVESTMENTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, CHRYSALIS INVESTMENTS 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 CHRYSALIS INVESTMENTS will offset losses from the drop in CHRYSALIS INVESTMENTS's long position.

The idea behind Aristocrat Leisure Limited and CHRYSALIS INVESTMENTS LTD 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 Stocks Directory module to find actively traded stocks across global markets.