Correlation Between Aristocrat Leisure and ELMOS SEMICONDUCTOR

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

Diversification Opportunities for Aristocrat Leisure and ELMOS SEMICONDUCTOR

0.31

Correlation Coefficient

Aristocrat Leisure  ELMOS SEMICONDUCTOR

Weak diversification

The 3 months correlation between Aristocrat and ELMOS is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure Limited and ELMOS SEMICONDUCTOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELMOS SEMICONDUCTOR has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and ELMOS SEMICONDUCTOR go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and ELMOS SEMICONDUCTOR

Assuming the 90 days horizon Aristocrat Leisure Limited is expected to generate 0.61 times more return on investment than ELMOS SEMICONDUCTOR. However, Aristocrat Leisure Limited is 1.64 times less risky than ELMOS SEMICONDUCTOR. It trades about 0.1 of its potential returns per unit of risk. ELMOS SEMICONDUCTOR is currently generating about 0.04 per unit of risk. If you would invest  1,806  in Aristocrat Leisure Limited on October 9, 2024 and sell it today you would earn a total of  2,374  from holding Aristocrat Leisure Limited or generate 131.45% return on investment over 90 days.

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

Aristocrat Leisure Limited  vs.  ELMOS SEMICONDUCTOR

Aristocrat Leisure

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Aristocrat Leisure reported solid returns over the last few months and may actually be approaching a breakup point.

ELMOS SEMICONDUCTOR

Risk-Adjusted Performance

6 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ELMOS SEMICONDUCTOR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, ELMOS SEMICONDUCTOR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aristocrat Leisure and ELMOS SEMICONDUCTOR

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

The idea behind Aristocrat Leisure Limited and ELMOS SEMICONDUCTOR 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.