Correlation Between ARISTOCRAT LEISURE and Jiangsu Expressway

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

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

Diversification Opportunities for ARISTOCRAT LEISURE and Jiangsu Expressway

0.2

Correlation Coefficient

ARISTOCRAT LEISURE  Jiangsu Expressway

Modest diversification

The 3 months correlation between ARISTOCRAT and Jiangsu is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding ARISTOCRAT LEISURE and Jiangsu Expressway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Expressway 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 Jiangsu Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Expressway has no effect on the direction of ARISTOCRAT LEISURE i.e., ARISTOCRAT LEISURE and Jiangsu Expressway go up and down completely randomly.

Pair Corralation between ARISTOCRAT LEISURE and Jiangsu Expressway

If you would invest  2,092  in ARISTOCRAT LEISURE on October 23, 2024 and sell it today you would earn a total of  2,188  from holding ARISTOCRAT LEISURE or generate 104.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.0%
Values	Daily Returns

ARISTOCRAT LEISURE  vs.  Jiangsu Expressway

ARISTOCRAT LEISURE

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ARISTOCRAT LEISURE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Expressway

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Jiangsu Expressway has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Jiangsu Expressway is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ARISTOCRAT LEISURE and Jiangsu Expressway

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

The idea behind ARISTOCRAT LEISURE and Jiangsu Expressway 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.