Correlation Between Aristocrat Leisure and Traton SE

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

Diversification Opportunities for Aristocrat Leisure and Traton SE

-0.52

Correlation Coefficient

Aristocrat Leisure  Traton SE

Excellent diversification

The 3 months correlation between Aristocrat and Traton is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure Limited and Traton SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traton SE 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 Traton SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traton SE has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Traton SE go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and Traton SE

Assuming the 90 days horizon Aristocrat Leisure Limited is expected to generate 0.54 times more return on investment than Traton SE. However, Aristocrat Leisure Limited is 1.84 times less risky than Traton SE. It trades about 0.03 of its potential returns per unit of risk. Traton SE is currently generating about -0.01 per unit of risk. If you would invest  4,118  in Aristocrat Leisure Limited on October 26, 2024 and sell it today you would earn a total of  42.00  from holding Aristocrat Leisure Limited or generate 1.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.5%
Values	Daily Returns

Aristocrat Leisure Limited  vs.  Traton SE

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.

Traton SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Traton SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Aristocrat Leisure and Traton SE

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

The idea behind Aristocrat Leisure Limited and Traton SE 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.