Correlation Between Aristocrat Leisure and ARN Media

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

By analyzing existing cross correlation between Aristocrat Leisure and ARN Media Limited, you can compare the effects of market volatilities on Aristocrat Leisure and ARN Media 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 ARN Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and ARN Media.

Diversification Opportunities for Aristocrat Leisure and ARN Media

-0.38

Correlation Coefficient

Aristocrat Leisure  ARN Media

Very good diversification

The 3 months correlation between Aristocrat and ARN is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and ARN Media Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARN Media Limited 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 ARN Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARN Media Limited has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and ARN Media go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and ARN Media

Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 0.72 times more return on investment than ARN Media. However, Aristocrat Leisure is 1.4 times less risky than ARN Media. It trades about -0.04 of its potential returns per unit of risk. ARN Media Limited is currently generating about -0.1 per unit of risk. If you would invest  6,876  in Aristocrat Leisure on December 22, 2024 and sell it today you would lose (305.00) from holding Aristocrat Leisure or give up 4.44% of portfolio value over 90 days.

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

Aristocrat Leisure  vs.  ARN Media Limited

Aristocrat Leisure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aristocrat Leisure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential 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.

ARN Media Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARN Media Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Aristocrat Leisure and ARN Media

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

The idea behind Aristocrat Leisure and ARN Media Limited 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.