Correlation Between Aristocrat Leisure and Bank Of Queensland Ltd

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

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

Diversification Opportunities for Aristocrat Leisure and Bank Of Queensland Ltd

0.66

Correlation Coefficient

Aristocrat Leisure  Bank Of Queensland Ltd

Poor diversification

The 3 months correlation between Aristocrat and Bank is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Bank Of Queensland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Of Queensland Ltd 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 Bank Of Queensland Ltd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Of Queensland Ltd has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Bank Of Queensland Ltd go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and Bank Of Queensland Ltd

Assuming the 90 days trading horizon Aristocrat Leisure is expected to under-perform the Bank Of Queensland Ltd. In addition to that, Aristocrat Leisure is 1.74 times more volatile than Bank Of Queensland. It trades about -0.05 of its total potential returns per unit of risk. Bank Of Queensland is currently generating about 0.02 per unit of volatility. If you would invest  670.00  in Bank Of Queensland on December 30, 2024 and sell it today you would earn a total of  8.00  from holding Bank Of Queensland or generate 1.19% return on investment over 90 days.

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

Aristocrat Leisure  vs.  Bank Of Queensland

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.

Bank Of Queensland Ltd

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Of Queensland are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bank Of Queensland Ltd is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aristocrat Leisure and Bank Of Queensland Ltd

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

The idea behind Aristocrat Leisure and Bank Of Queensland 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .