Correlation Between ARISTOCRAT LEISURE and ADRIATIC METALS

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

By analyzing existing cross correlation between ARISTOCRAT LEISURE and ADRIATIC METALS LS 013355, you can compare the effects of market volatilities on ARISTOCRAT LEISURE and ADRIATIC METALS 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 ADRIATIC METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARISTOCRAT LEISURE and ADRIATIC METALS.

Diversification Opportunities for ARISTOCRAT LEISURE and ADRIATIC METALS

0.3

Correlation Coefficient

ARISTOCRAT LEISURE  ADRIATIC METALS

Weak diversification

The 3 months correlation between ARISTOCRAT and ADRIATIC is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ARISTOCRAT LEISURE and ADRIATIC METALS LS 013355 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADRIATIC METALS LS 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 ADRIATIC METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADRIATIC METALS LS has no effect on the direction of ARISTOCRAT LEISURE i.e., ARISTOCRAT LEISURE and ADRIATIC METALS go up and down completely randomly.

Pair Corralation between ARISTOCRAT LEISURE and ADRIATIC METALS

Assuming the 90 days trading horizon ARISTOCRAT LEISURE is expected to generate 0.32 times more return on investment than ADRIATIC METALS. However, ARISTOCRAT LEISURE is 3.15 times less risky than ADRIATIC METALS. It trades about 0.28 of its potential returns per unit of risk. ADRIATIC METALS LS 013355 is currently generating about 0.05 per unit of risk. If you would invest  3,564  in ARISTOCRAT LEISURE on October 9, 2024 and sell it today you would earn a total of  636.00  from holding ARISTOCRAT LEISURE or generate 17.85% 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  vs.  ADRIATIC METALS LS 013355

ARISTOCRAT LEISURE

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, ARISTOCRAT LEISURE unveiled solid returns over the last few months and may actually be approaching a breakup point.

ADRIATIC METALS LS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ADRIATIC METALS LS 013355 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ADRIATIC METALS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ARISTOCRAT LEISURE and ADRIATIC METALS

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

The idea behind ARISTOCRAT LEISURE and ADRIATIC METALS LS 013355 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.