Correlation Between ARISTOCRAT LEISURE and HEINEKEN

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

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

Diversification Opportunities for ARISTOCRAT LEISURE and HEINEKEN

-0.96

Correlation Coefficient

ARISTOCRAT LEISURE  HEINEKEN

Pay attention - limited upside

The 3 months correlation between ARISTOCRAT and HEINEKEN is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding ARISTOCRAT LEISURE and HEINEKEN SP ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEINEKEN SP ADR 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 HEINEKEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEINEKEN SP ADR has no effect on the direction of ARISTOCRAT LEISURE i.e., ARISTOCRAT LEISURE and HEINEKEN go up and down completely randomly.

Pair Corralation between ARISTOCRAT LEISURE and HEINEKEN

Assuming the 90 days trading horizon ARISTOCRAT LEISURE is expected to generate 1.31 times more return on investment than HEINEKEN. However, ARISTOCRAT LEISURE is 1.31 times more volatile than HEINEKEN SP ADR. It trades about 0.07 of its potential returns per unit of risk. HEINEKEN SP ADR is currently generating about -0.05 per unit of risk. If you would invest  4,160  in ARISTOCRAT LEISURE on October 9, 2024 and sell it today you would earn a total of  40.00  from holding ARISTOCRAT LEISURE or generate 0.96% return on investment over 90 days.

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

ARISTOCRAT LEISURE  vs.  HEINEKEN SP ADR

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.

HEINEKEN SP ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEINEKEN SP ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ARISTOCRAT LEISURE and HEINEKEN

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

The idea behind ARISTOCRAT LEISURE and HEINEKEN SP ADR 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.