Correlation Between Carawine Resources and Aristocrat Leisure

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

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

Diversification Opportunities for Carawine Resources and Aristocrat Leisure

0.53

Correlation Coefficient

Carawine Resources  Aristocrat Leisure

Very weak diversification

The 3 months correlation between Carawine and Aristocrat is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Carawine Resources Limited and Aristocrat Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and Carawine Resources 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 Carawine Resources Limited 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 Carawine Resources i.e., Carawine Resources and Aristocrat Leisure go up and down completely randomly.

Pair Corralation between Carawine Resources and Aristocrat Leisure

Assuming the 90 days trading horizon Carawine Resources Limited is expected to under-perform the Aristocrat Leisure. In addition to that, Carawine Resources is 2.55 times more volatile than Aristocrat Leisure. It trades about -0.02 of its total potential returns per unit of risk. Aristocrat Leisure is currently generating about 0.13 per unit of volatility. If you would invest  3,970  in Aristocrat Leisure on September 26, 2024 and sell it today you would earn a total of  2,907  from holding Aristocrat Leisure or generate 73.22% return on investment over 90 days.

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

Carawine Resources Limited  vs.  Aristocrat Leisure

Carawine Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carawine Resources Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Carawine Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aristocrat Leisure

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure are ranked lower than 17 (%) 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 Carawine Resources and Aristocrat Leisure

The main advantage of trading using opposite Carawine Resources and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carawine Resources 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 Carawine Resources Limited 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.