Correlation Between Aristocrat Leisure and Genesco

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

Diversification Opportunities for Aristocrat Leisure and Genesco

0.77

Correlation Coefficient

Aristocrat Leisure  Genesco

Poor diversification

The 3 months correlation between Aristocrat and Genesco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure Limited and Genesco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genesco 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 Genesco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genesco has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Genesco go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and Genesco

Assuming the 90 days horizon Aristocrat Leisure Limited is expected to generate 0.45 times more return on investment than Genesco. However, Aristocrat Leisure Limited is 2.2 times less risky than Genesco. It trades about 0.09 of its potential returns per unit of risk. Genesco is currently generating about 0.02 per unit of risk. If you would invest  1,977  in Aristocrat Leisure Limited on October 4, 2024 and sell it today you would earn a total of  2,143  from holding Aristocrat Leisure Limited or generate 108.4% 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.  Genesco

Aristocrat Leisure

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure Limited are ranked lower than 16 (%) 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.

Genesco

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Genesco are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Genesco reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aristocrat Leisure and Genesco

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

The idea behind Aristocrat Leisure Limited and Genesco 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.