Correlation Between Regal Funds and Aristocrat Leisure

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

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

Diversification Opportunities for Regal Funds and Aristocrat Leisure

0.77

Correlation Coefficient

Regal Funds  Aristocrat Leisure

Poor diversification

The 3 months correlation between Regal and Aristocrat is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Regal Funds Management and Aristocrat Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and Regal Funds 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 Regal Funds Management 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 Regal Funds i.e., Regal Funds and Aristocrat Leisure go up and down completely randomly.

Pair Corralation between Regal Funds and Aristocrat Leisure

Assuming the 90 days trading horizon Regal Funds is expected to generate 1.53 times less return on investment than Aristocrat Leisure. In addition to that, Regal Funds is 1.6 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 0.26 per unit of volatility. If you would invest  5,492  in Aristocrat Leisure on September 12, 2024 and sell it today you would earn a total of  1,298  from holding Aristocrat Leisure or generate 23.63% return on investment over 90 days.

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

Regal Funds Management  vs.  Aristocrat Leisure

Regal Funds Management

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regal Funds Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Regal Funds unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aristocrat Leisure

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure are ranked lower than 20 (%) 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 Regal Funds and Aristocrat Leisure

The main advantage of trading using opposite Regal Funds and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regal Funds 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 Regal Funds Management 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.