Correlation Between Aristocrat Leisure and Nike

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

Diversification Opportunities for Aristocrat Leisure and Nike

0.25

Correlation Coefficient

Aristocrat Leisure  Nike

Modest diversification

The 3 months correlation between Aristocrat and Nike is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure Limited and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc 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 Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Nike go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and Nike

If you would invest  4,100  in Aristocrat Leisure Limited on October 23, 2024 and sell it today you would earn a total of  160.00  from holding Aristocrat Leisure Limited or generate 3.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	6.25%
Values	Daily Returns

Aristocrat Leisure Limited  vs.  Nike Inc

Aristocrat Leisure

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Aristocrat Leisure reported solid returns over the last few months and may actually be approaching a breakup point.

Nike Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Aristocrat Leisure and Nike

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

The idea behind Aristocrat Leisure Limited and Nike Inc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.