Correlation Between Flagship Investments and Aristocrat Leisure

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

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

Diversification Opportunities for Flagship Investments and Aristocrat Leisure

0.83

Correlation Coefficient

Flagship Investments  Aristocrat Leisure

Very poor diversification

The 3 months correlation between Flagship and Aristocrat is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Flagship Investments and Aristocrat Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and Flagship Investments 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 Flagship Investments 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 Flagship Investments i.e., Flagship Investments and Aristocrat Leisure go up and down completely randomly.

Pair Corralation between Flagship Investments and Aristocrat Leisure

Assuming the 90 days trading horizon Flagship Investments is expected to generate 1.98 times less return on investment than Aristocrat Leisure. In addition to that, Flagship Investments is 1.05 times more volatile than Aristocrat Leisure. It trades about 0.1 of its total potential returns per unit of risk. Aristocrat Leisure is currently generating about 0.21 per unit of volatility. If you would invest  5,667  in Aristocrat Leisure on September 21, 2024 and sell it today you would earn a total of  1,133  from holding Aristocrat Leisure or generate 19.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Flagship Investments  vs.  Aristocrat Leisure

Flagship Investments

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flagship Investments are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Flagship Investments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aristocrat Leisure

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure are ranked lower than 16 (%) 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 Flagship Investments and Aristocrat Leisure

The main advantage of trading using opposite Flagship Investments and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flagship Investments 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 Flagship Investments 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..