Correlation Between Sandon Capital and Aristocrat Leisure

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

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

Diversification Opportunities for Sandon Capital and Aristocrat Leisure

0.71

Correlation Coefficient

Sandon Capital  Aristocrat Leisure

Poor diversification

The 3 months correlation between Sandon and Aristocrat is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sandon Capital Investments and Aristocrat Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and Sandon Capital 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 Sandon Capital 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 Sandon Capital i.e., Sandon Capital and Aristocrat Leisure go up and down completely randomly.

Pair Corralation between Sandon Capital and Aristocrat Leisure

Assuming the 90 days trading horizon Sandon Capital Investments is expected to generate 0.81 times more return on investment than Aristocrat Leisure. However, Sandon Capital Investments is 1.24 times less risky than Aristocrat Leisure. It trades about 0.01 of its potential returns per unit of risk. Aristocrat Leisure is currently generating about -0.04 per unit of risk. If you would invest  76.00  in Sandon Capital Investments on December 22, 2024 and sell it today you would earn a total of  0.00  from holding Sandon Capital Investments or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

Sandon Capital Investments  vs.  Aristocrat Leisure

Sandon Capital Inves

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sandon Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Sandon Capital is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Aristocrat Leisure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aristocrat Leisure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Aristocrat Leisure is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sandon Capital and Aristocrat Leisure

The main advantage of trading using opposite Sandon Capital and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandon Capital 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 Sandon Capital 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.