Correlation Between Alternative Investment and Aristocrat Leisure

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

By analyzing existing cross correlation between Alternative Investment Trust and Aristocrat Leisure, you can compare the effects of market volatilities on Alternative Investment and Aristocrat Leisure 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 Alternative Investment with a short position of Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alternative Investment and Aristocrat Leisure.

Diversification Opportunities for Alternative Investment and Aristocrat Leisure

0.36

Correlation Coefficient

Alternative Investment  Aristocrat Leisure

Weak diversification

The 3 months correlation between Alternative and Aristocrat is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Alternative Investment Trust and Aristocrat Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and Alternative Investment 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 Alternative Investment Trust are associated (or correlated) with Aristocrat Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Leisure has no effect on the direction of Alternative Investment i.e., Alternative Investment and Aristocrat Leisure go up and down completely randomly.

Pair Corralation between Alternative Investment and Aristocrat Leisure

Assuming the 90 days trading horizon Alternative Investment is expected to generate 4.96 times less return on investment than Aristocrat Leisure. But when comparing it to its historical volatility, Alternative Investment Trust is 2.46 times less risky than Aristocrat Leisure. It trades about 0.14 of its potential returns per unit of risk. Aristocrat Leisure is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  5,818  in Aristocrat Leisure on October 11, 2024 and sell it today you would earn a total of  1,338  from holding Aristocrat Leisure or generate 23.0% return on investment over 90 days.

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

Alternative Investment Trust  vs.  Aristocrat Leisure

Alternative Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alternative Investment Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Alternative Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Aristocrat Leisure

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Aristocrat Leisure unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alternative Investment and Aristocrat Leisure

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

The idea behind Alternative Investment Trust and Aristocrat Leisure 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.