Correlation Between Aristocrat Leisure and 888 Holdings

Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and 888 Holdings 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 888 Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aristocrat Leisure Limited and 888 Holdings, you can compare the effects of market volatilities on Aristocrat Leisure and 888 Holdings 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 888 Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and 888 Holdings.

Diversification Opportunities for Aristocrat Leisure and 888 Holdings

0.5

Correlation Coefficient

Aristocrat Leisure  888 Holdings

Very weak diversification

The 3 months correlation between Aristocrat and 888 is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure Limited and 888 Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 888 Holdings 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 Limited are associated (or correlated) with 888 Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 888 Holdings has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and 888 Holdings go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and 888 Holdings

Assuming the 90 days horizon Aristocrat Leisure Limited is expected to under-perform the 888 Holdings. In addition to that, Aristocrat Leisure is 1.34 times more volatile than 888 Holdings. It trades about -0.02 of its total potential returns per unit of risk. 888 Holdings is currently generating about 0.05 per unit of volatility. If you would invest  77.00  in 888 Holdings on December 30, 2024 and sell it today you would earn a total of  6.00  from holding 888 Holdings or generate 7.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Aristocrat Leisure Limited  vs.  888 Holdings

Aristocrat Leisure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aristocrat Leisure Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aristocrat Leisure is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

888 Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 888 Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, 888 Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Aristocrat Leisure and 888 Holdings

The main advantage of trading using opposite Aristocrat Leisure and 888 Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, 888 Holdings 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 888 Holdings will offset losses from the drop in 888 Holdings' long position.

The idea behind Aristocrat Leisure Limited and 888 Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.