Correlation Between Aristocrat Leisure and Carawine Resources

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Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Carawine Resources 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 Carawine Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure and Carawine Resources Limited, you can compare the effects of market volatilities on Aristocrat Leisure and Carawine Resources 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 Carawine Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Carawine Resources.

Diversification Opportunities for Aristocrat Leisure and Carawine Resources

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Aristocrat and Carawine is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Carawine Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carawine Resources 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 Carawine Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carawine Resources has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Carawine Resources go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and Carawine Resources

Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 0.35 times more return on investment than Carawine Resources. However, Aristocrat Leisure is 2.82 times less risky than Carawine Resources. It trades about 0.12 of its potential returns per unit of risk. Carawine Resources Limited is currently generating about 0.01 per unit of risk. If you would invest  3,043  in Aristocrat Leisure on September 26, 2024 and sell it today you would earn a total of  3,834  from holding Aristocrat Leisure or generate 125.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Aristocrat Leisure  vs.  Carawine Resources Limited

 Performance 
       Timeline  
Aristocrat Leisure 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure are ranked lower than 17 (%) 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.
Carawine Resources 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Carawine Resources Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Carawine Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aristocrat Leisure and Carawine Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aristocrat Leisure and Carawine Resources

The main advantage of trading using opposite Aristocrat Leisure and Carawine Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Carawine Resources 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 Carawine Resources will offset losses from the drop in Carawine Resources' long position.
The idea behind Aristocrat Leisure and Carawine Resources 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.
Check out your portfolio center.
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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