Correlation Between ANZ Group and Aristocrat Leisure

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

By analyzing existing cross correlation between ANZ Group Holdings and Aristocrat Leisure, you can compare the effects of market volatilities on ANZ Group and Aristocrat Leisure 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 ANZ Group with a short position of Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of ANZ Group and Aristocrat Leisure.

Diversification Opportunities for ANZ Group and Aristocrat Leisure

-0.37

Correlation Coefficient

ANZ Group  Aristocrat Leisure

Very good diversification

The 3 months correlation between ANZ and Aristocrat is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding ANZ Group Holdings and Aristocrat Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and ANZ Group 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 ANZ Group Holdings are associated (or correlated) with Aristocrat Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Leisure has no effect on the direction of ANZ Group i.e., ANZ Group and Aristocrat Leisure go up and down completely randomly.

Pair Corralation between ANZ Group and Aristocrat Leisure

Assuming the 90 days trading horizon ANZ Group Holdings is expected to generate 0.35 times more return on investment than Aristocrat Leisure. However, ANZ Group Holdings is 2.86 times less risky than Aristocrat Leisure. It trades about 0.03 of its potential returns per unit of risk. Aristocrat Leisure is currently generating about -0.04 per unit of risk. If you would invest  10,395  in ANZ Group Holdings on October 4, 2024 and sell it today you would earn a total of  28.00  from holding ANZ Group Holdings or generate 0.27% return on investment over 90 days.

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

ANZ Group Holdings  vs.  Aristocrat Leisure

ANZ Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ANZ Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ANZ Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aristocrat Leisure

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure are ranked lower than 19 (%) 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.

Pair Trading with ANZ Group and Aristocrat Leisure

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

The idea behind ANZ Group Holdings and Aristocrat Leisure 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.