Correlation Between FAST RETAIL and Aristocrat Leisure

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

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

Diversification Opportunities for FAST RETAIL and Aristocrat Leisure

0.17

Correlation Coefficient

FAST RETAIL  Aristocrat Leisure

Average diversification

The 3 months correlation between FAST and Aristocrat is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and Aristocrat Leisure Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and FAST RETAIL 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 FAST RETAIL ADR 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 FAST RETAIL i.e., FAST RETAIL and Aristocrat Leisure go up and down completely randomly.

Pair Corralation between FAST RETAIL and Aristocrat Leisure

Assuming the 90 days trading horizon FAST RETAIL ADR is expected to under-perform the Aristocrat Leisure. In addition to that, FAST RETAIL is 1.41 times more volatile than Aristocrat Leisure Limited. It trades about -0.01 of its total potential returns per unit of risk. Aristocrat Leisure Limited is currently generating about 0.19 per unit of volatility. If you would invest  3,603  in Aristocrat Leisure Limited on October 26, 2024 and sell it today you would earn a total of  557.00  from holding Aristocrat Leisure Limited or generate 15.46% return on investment over 90 days.

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

FAST RETAIL ADR  vs.  Aristocrat Leisure Limited

FAST RETAIL ADR

Risk-Adjusted Performance

0 of 100

Weak

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

Aristocrat Leisure

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aristocrat Leisure reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FAST RETAIL and Aristocrat Leisure

The main advantage of trading using opposite FAST RETAIL and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAST RETAIL 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 FAST RETAIL ADR and Aristocrat Leisure Limited 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.