Correlation Between ARISTOCRAT LEISURE and AEGEAN AIRLINES

Can any of the company-specific risk be diversified away by investing in both ARISTOCRAT LEISURE and AEGEAN AIRLINES 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 AEGEAN AIRLINES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ARISTOCRAT LEISURE and AEGEAN AIRLINES, you can compare the effects of market volatilities on ARISTOCRAT LEISURE and AEGEAN AIRLINES 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 AEGEAN AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARISTOCRAT LEISURE and AEGEAN AIRLINES.

Diversification Opportunities for ARISTOCRAT LEISURE and AEGEAN AIRLINES

0.64

Correlation Coefficient

ARISTOCRAT LEISURE  AEGEAN AIRLINES

Poor diversification

The 3 months correlation between ARISTOCRAT and AEGEAN is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ARISTOCRAT LEISURE and AEGEAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEGEAN AIRLINES 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 are associated (or correlated) with AEGEAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEGEAN AIRLINES has no effect on the direction of ARISTOCRAT LEISURE i.e., ARISTOCRAT LEISURE and AEGEAN AIRLINES go up and down completely randomly.

Pair Corralation between ARISTOCRAT LEISURE and AEGEAN AIRLINES

Assuming the 90 days trading horizon ARISTOCRAT LEISURE is expected to generate 2.87 times less return on investment than AEGEAN AIRLINES. But when comparing it to its historical volatility, ARISTOCRAT LEISURE is 1.11 times less risky than AEGEAN AIRLINES. It trades about 0.06 of its potential returns per unit of risk. AEGEAN AIRLINES is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  936.00  in AEGEAN AIRLINES on December 2, 2024 and sell it today you would earn a total of  132.00  from holding AEGEAN AIRLINES or generate 14.1% return on investment over 90 days.

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

ARISTOCRAT LEISURE  vs.  AEGEAN AIRLINES

ARISTOCRAT LEISURE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ARISTOCRAT LEISURE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

AEGEAN AIRLINES

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AEGEAN AIRLINES are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, AEGEAN AIRLINES exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ARISTOCRAT LEISURE and AEGEAN AIRLINES

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

The idea behind ARISTOCRAT LEISURE and AEGEAN AIRLINES 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.