Correlation Between Aristocrat Leisure and Oceania Healthcare

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

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

Diversification Opportunities for Aristocrat Leisure and Oceania Healthcare

-0.26

Correlation Coefficient

Aristocrat Leisure  Oceania Healthcare

Very good diversification

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

Pair Corralation between Aristocrat Leisure and Oceania Healthcare

Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 0.44 times more return on investment than Oceania Healthcare. However, Aristocrat Leisure is 2.28 times less risky than Oceania Healthcare. It trades about 0.05 of its potential returns per unit of risk. Oceania Healthcare is currently generating about -0.22 per unit of risk. If you would invest  6,719  in Aristocrat Leisure on September 22, 2024 and sell it today you would earn a total of  81.00  from holding Aristocrat Leisure or generate 1.21% return on investment over 90 days.

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

Aristocrat Leisure  vs.  Oceania Healthcare

Aristocrat Leisure

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure are ranked lower than 16 (%) 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.

Oceania Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oceania Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Oceania Healthcare 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 Oceania Healthcare

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

The idea behind Aristocrat Leisure and Oceania Healthcare 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 Global Correlations module to find global opportunities by holding instruments from different markets.