Correlation Between ARISTOCRAT LEISURE and ALERION CLEANPOWER

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

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

Diversification Opportunities for ARISTOCRAT LEISURE and ALERION CLEANPOWER

-0.59

Correlation Coefficient

ARISTOCRAT LEISURE  ALERION CLEANPOWER

Excellent diversification

The 3 months correlation between ARISTOCRAT and ALERION is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding ARISTOCRAT LEISURE and ALERION CLEANPOWER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALERION CLEANPOWER 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 ALERION CLEANPOWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALERION CLEANPOWER has no effect on the direction of ARISTOCRAT LEISURE i.e., ARISTOCRAT LEISURE and ALERION CLEANPOWER go up and down completely randomly.

Pair Corralation between ARISTOCRAT LEISURE and ALERION CLEANPOWER

Assuming the 90 days trading horizon ARISTOCRAT LEISURE is expected to generate 0.7 times more return on investment than ALERION CLEANPOWER. However, ARISTOCRAT LEISURE is 1.42 times less risky than ALERION CLEANPOWER. It trades about 0.02 of its potential returns per unit of risk. ALERION CLEANPOWER is currently generating about -0.35 per unit of risk. If you would invest  4,260  in ARISTOCRAT LEISURE on December 3, 2024 and sell it today you would earn a total of  60.00  from holding ARISTOCRAT LEISURE or generate 1.41% return on investment over 90 days.

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

ARISTOCRAT LEISURE  vs.  ALERION CLEANPOWER

ARISTOCRAT LEISURE

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 1 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

ALERION CLEANPOWER

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALERION CLEANPOWER has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ARISTOCRAT LEISURE and ALERION CLEANPOWER

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

The idea behind ARISTOCRAT LEISURE and ALERION CLEANPOWER 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.