Correlation Between TRAVEL + and ARISTOCRAT LEISURE

Can any of the company-specific risk be diversified away by investing in both TRAVEL + 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 TRAVEL + and ARISTOCRAT LEISURE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and ARISTOCRAT LEISURE, you can compare the effects of market volatilities on TRAVEL + 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 TRAVEL + with a short position of ARISTOCRAT LEISURE. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL + and ARISTOCRAT LEISURE.

Diversification Opportunities for TRAVEL + and ARISTOCRAT LEISURE

0.97

Correlation Coefficient

TRAVEL +  ARISTOCRAT LEISURE

Almost no diversification

The 3 months correlation between TRAVEL and ARISTOCRAT is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and ARISTOCRAT LEISURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARISTOCRAT LEISURE and TRAVEL + 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 TRAVEL LEISURE DL 01 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 TRAVEL + i.e., TRAVEL + and ARISTOCRAT LEISURE go up and down completely randomly.

Pair Corralation between TRAVEL + and ARISTOCRAT LEISURE

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 1.66 times more return on investment than ARISTOCRAT LEISURE. However, TRAVEL + is 1.66 times more volatile than ARISTOCRAT LEISURE. It trades about 0.31 of its potential returns per unit of risk. ARISTOCRAT LEISURE is currently generating about 0.43 per unit of risk. If you would invest  3,829  in TRAVEL LEISURE DL 01 on September 5, 2024 and sell it today you would earn a total of  1,421  from holding TRAVEL LEISURE DL 01 or generate 37.11% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  ARISTOCRAT LEISURE

TRAVEL LEISURE DL

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

ARISTOCRAT LEISURE

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ARISTOCRAT LEISURE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAVEL + and ARISTOCRAT LEISURE

The main advantage of trading using opposite TRAVEL + and ARISTOCRAT LEISURE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAVEL + 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 TRAVEL LEISURE DL 01 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.