Correlation Between Corporate Office and ARISTOCRAT LEISURE

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

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

Diversification Opportunities for Corporate Office and ARISTOCRAT LEISURE

0.09

Correlation Coefficient

Corporate Office  ARISTOCRAT LEISURE

Significant diversification

The 3 months correlation between Corporate and ARISTOCRAT is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Office Properties and ARISTOCRAT LEISURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARISTOCRAT LEISURE and Corporate Office 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 Corporate Office Properties 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 Corporate Office i.e., Corporate Office and ARISTOCRAT LEISURE go up and down completely randomly.

Pair Corralation between Corporate Office and ARISTOCRAT LEISURE

Assuming the 90 days horizon Corporate Office Properties is expected to under-perform the ARISTOCRAT LEISURE. But the stock apears to be less risky and, when comparing its historical volatility, Corporate Office Properties is 1.11 times less risky than ARISTOCRAT LEISURE. The stock trades about -0.21 of its potential returns per unit of risk. The ARISTOCRAT LEISURE is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  4,160  in ARISTOCRAT LEISURE on December 24, 2024 and sell it today you would lose (320.00) from holding ARISTOCRAT LEISURE or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Corporate Office Properties  vs.  ARISTOCRAT LEISURE

Corporate Office Pro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Corporate Office Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Corporate Office and ARISTOCRAT LEISURE

The main advantage of trading using opposite Corporate Office and ARISTOCRAT LEISURE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Office 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 Corporate Office Properties 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.