Correlation Between Aristocrat Leisure and TROPHY GAMES

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

Diversification Opportunities for Aristocrat Leisure and TROPHY GAMES

-0.54

Correlation Coefficient

Aristocrat Leisure  TROPHY GAMES

Excellent diversification

The 3 months correlation between Aristocrat and TROPHY is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure Limited and TROPHY GAMES DEV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TROPHY GAMES DEV 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 TROPHY GAMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TROPHY GAMES DEV has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and TROPHY GAMES go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and TROPHY GAMES

Assuming the 90 days horizon Aristocrat Leisure Limited is expected to generate 0.59 times more return on investment than TROPHY GAMES. However, Aristocrat Leisure Limited is 1.7 times less risky than TROPHY GAMES. It trades about 0.26 of its potential returns per unit of risk. TROPHY GAMES DEV is currently generating about 0.01 per unit of risk. If you would invest  3,286  in Aristocrat Leisure Limited on September 2, 2024 and sell it today you would earn a total of  874.00  from holding Aristocrat Leisure Limited or generate 26.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aristocrat Leisure Limited  vs.  TROPHY GAMES DEV

Aristocrat Leisure

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure Limited are ranked lower than 20 (%) 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.

TROPHY GAMES DEV

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aristocrat Leisure and TROPHY GAMES

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

The idea behind Aristocrat Leisure Limited and TROPHY GAMES DEV 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.