Correlation Between Aristocrat Leisure and HANSOH PHARMAC

Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and HANSOH PHARMAC 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 HANSOH PHARMAC 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 HANSOH PHARMAC HD 00001, you can compare the effects of market volatilities on Aristocrat Leisure and HANSOH PHARMAC 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 HANSOH PHARMAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and HANSOH PHARMAC.

Diversification Opportunities for Aristocrat Leisure and HANSOH PHARMAC

0.08

Correlation Coefficient

Aristocrat Leisure  HANSOH PHARMAC

Significant diversification

The 3 months correlation between Aristocrat and HANSOH is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure Limited and HANSOH PHARMAC HD 00001 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANSOH PHARMAC HD 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 HANSOH PHARMAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HANSOH PHARMAC HD has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and HANSOH PHARMAC go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and HANSOH PHARMAC

Assuming the 90 days horizon Aristocrat Leisure Limited is expected to generate 0.37 times more return on investment than HANSOH PHARMAC. However, Aristocrat Leisure Limited is 2.69 times less risky than HANSOH PHARMAC. It trades about 0.19 of its potential returns per unit of risk. HANSOH PHARMAC HD 00001 is currently generating about -0.04 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Aristocrat Leisure Limited  vs.  HANSOH PHARMAC HD 00001

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.

HANSOH PHARMAC HD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HANSOH PHARMAC HD 00001 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Aristocrat Leisure and HANSOH PHARMAC

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

The idea behind Aristocrat Leisure Limited and HANSOH PHARMAC HD 00001 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.