Correlation Between Aristocrat Leisure and CVW CLEANTECH

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

Diversification Opportunities for Aristocrat Leisure and CVW CLEANTECH

0.54

Correlation Coefficient

Aristocrat Leisure  CVW CLEANTECH

Very weak diversification

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

Pair Corralation between Aristocrat Leisure and CVW CLEANTECH

Assuming the 90 days horizon Aristocrat Leisure is expected to generate 5.7 times less return on investment than CVW CLEANTECH. But when comparing it to its historical volatility, Aristocrat Leisure Limited is 3.82 times less risky than CVW CLEANTECH. It trades about 0.03 of its potential returns per unit of risk. CVW CLEANTECH INC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  55.00  in CVW CLEANTECH INC on October 26, 2024 and sell it today you would earn a total of  1.00  from holding CVW CLEANTECH INC or generate 1.82% return on investment over 90 days.

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

Aristocrat Leisure Limited  vs.  CVW CLEANTECH INC

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.

CVW CLEANTECH INC

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CLEANTECH INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, CVW CLEANTECH may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Aristocrat Leisure and CVW CLEANTECH

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

The idea behind Aristocrat Leisure Limited and CVW CLEANTECH 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .