Correlation Between ARISTOCRAT LEISURE and PARK24 CO

Can any of the company-specific risk be diversified away by investing in both ARISTOCRAT LEISURE and PARK24 CO 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 PARK24 CO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ARISTOCRAT LEISURE and PARK24 LTD, you can compare the effects of market volatilities on ARISTOCRAT LEISURE and PARK24 CO 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 PARK24 CO. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARISTOCRAT LEISURE and PARK24 CO.

Diversification Opportunities for ARISTOCRAT LEISURE and PARK24 CO

0.63

Correlation Coefficient

ARISTOCRAT LEISURE  PARK24 CO

Poor diversification

The 3 months correlation between ARISTOCRAT and PARK24 is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ARISTOCRAT LEISURE and PARK24 LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PARK24 LTD 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 PARK24 CO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PARK24 LTD has no effect on the direction of ARISTOCRAT LEISURE i.e., ARISTOCRAT LEISURE and PARK24 CO go up and down completely randomly.

Pair Corralation between ARISTOCRAT LEISURE and PARK24 CO

Assuming the 90 days trading horizon ARISTOCRAT LEISURE is expected to generate 2.19 times less return on investment than PARK24 CO. But when comparing it to its historical volatility, ARISTOCRAT LEISURE is 2.13 times less risky than PARK24 CO. It trades about 0.23 of its potential returns per unit of risk. PARK24 LTD is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,090  in PARK24 LTD on October 7, 2024 and sell it today you would earn a total of  260.00  from holding PARK24 LTD or generate 23.85% 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.  PARK24 LTD

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 weak basic indicators, ARISTOCRAT LEISURE unveiled solid returns over the last few months and may actually be approaching a breakup point.

PARK24 LTD

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PARK24 LTD are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, PARK24 CO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ARISTOCRAT LEISURE and PARK24 CO

The main advantage of trading using opposite ARISTOCRAT LEISURE and PARK24 CO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARISTOCRAT LEISURE position performs unexpectedly, PARK24 CO 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 PARK24 CO will offset losses from the drop in PARK24 CO's long position.

The idea behind ARISTOCRAT LEISURE and PARK24 LTD 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.