Correlation Between Aristocrat Leisure and Elbit Imaging

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Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Elbit Imaging 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 Aristocrat Leisure and Elbit Imaging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aristocrat Leisure Limited and Elbit Imaging, you can compare the effects of market volatilities on Aristocrat Leisure and Elbit Imaging 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 Aristocrat Leisure with a short position of Elbit Imaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Elbit Imaging.

Diversification Opportunities for Aristocrat Leisure and Elbit Imaging

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Aristocrat and Elbit is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure Limited and Elbit Imaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Imaging and Aristocrat Leisure 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 Aristocrat Leisure Limited are associated (or correlated) with Elbit Imaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elbit Imaging has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Elbit Imaging go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and Elbit Imaging

Assuming the 90 days horizon Aristocrat Leisure Limited is expected to generate 0.52 times more return on investment than Elbit Imaging. However, Aristocrat Leisure Limited is 1.92 times less risky than Elbit Imaging. It trades about -0.13 of its potential returns per unit of risk. Elbit Imaging is currently generating about -0.07 per unit of risk. If you would invest  2,967  in Aristocrat Leisure Limited on December 30, 2023 and sell it today you would lose (126.00) from holding Aristocrat Leisure Limited or give up 4.25% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy81.82%
ValuesDaily Returns

Aristocrat Leisure Limited  vs.  Elbit Imaging

 Performance 
       Timeline  
Aristocrat Leisure 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aristocrat Leisure is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Elbit Imaging 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Elbit Imaging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Aristocrat Leisure and Elbit Imaging Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aristocrat Leisure and Elbit Imaging

The main advantage of trading using opposite Aristocrat Leisure and Elbit Imaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Elbit Imaging 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 Elbit Imaging will offset losses from the drop in Elbit Imaging's long position.
The idea behind Aristocrat Leisure Limited and Elbit Imaging 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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