Correlation Between Brown Forman and Aristocrat Group

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

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

Diversification Opportunities for Brown Forman and Aristocrat Group

0.51

Correlation Coefficient

Brown Forman  Aristocrat Group

Very weak diversification

The 3 months correlation between Brown and Aristocrat is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Brown Forman and Aristocrat Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Group Corp and Brown Forman 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 Brown Forman are associated (or correlated) with Aristocrat Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Group Corp has no effect on the direction of Brown Forman i.e., Brown Forman and Aristocrat Group go up and down completely randomly.

Pair Corralation between Brown Forman and Aristocrat Group

Given the investment horizon of 90 days Brown Forman is expected to generate 0.5 times more return on investment than Aristocrat Group. However, Brown Forman is 2.02 times less risky than Aristocrat Group. It trades about -0.01 of its potential returns per unit of risk. Aristocrat Group Corp is currently generating about -0.09 per unit of risk. If you would invest  4,623  in Brown Forman on September 13, 2024 and sell it today you would lose (125.00) from holding Brown Forman or give up 2.7% of portfolio value over 90 days.

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

Brown Forman  vs.  Aristocrat Group Corp

Brown Forman

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aristocrat Group Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aristocrat Group Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Brown Forman and Aristocrat Group

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

The idea behind Brown Forman and Aristocrat Group Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.