Correlation Between Aristocrat Leisure and Kingsrose Mining

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

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

Diversification Opportunities for Aristocrat Leisure and Kingsrose Mining

0.26

Correlation Coefficient

Aristocrat Leisure  Kingsrose Mining

Modest diversification

The 3 months correlation between Aristocrat and Kingsrose is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Kingsrose Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingsrose Mining 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 Kingsrose Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingsrose Mining has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Kingsrose Mining go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and Kingsrose Mining

Assuming the 90 days trading horizon Aristocrat Leisure is expected to under-perform the Kingsrose Mining. But the stock apears to be less risky and, when comparing its historical volatility, Aristocrat Leisure is 2.0 times less risky than Kingsrose Mining. The stock trades about -0.11 of its potential returns per unit of risk. The Kingsrose Mining is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Kingsrose Mining on December 2, 2024 and sell it today you would earn a total of  0.10  from holding Kingsrose Mining or generate 2.86% return on investment over 90 days.

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

Aristocrat Leisure  vs.  Kingsrose Mining

Aristocrat Leisure

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Aristocrat Leisure may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Kingsrose Mining

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kingsrose Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Kingsrose Mining may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Aristocrat Leisure and Kingsrose Mining

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

The idea behind Aristocrat Leisure and Kingsrose Mining 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.