Correlation Between Aristocrat Leisure and Telephone
Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Telephone 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 Telephone 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 Telephone and Data, you can compare the effects of market volatilities on Aristocrat Leisure and Telephone 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 Telephone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Telephone.
Diversification Opportunities for Aristocrat Leisure and Telephone
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Aristocrat and Telephone is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure Limited and Telephone and Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telephone and Data 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 Telephone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telephone and Data has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Telephone go up and down completely randomly.
Pair Corralation between Aristocrat Leisure and Telephone
Assuming the 90 days horizon Aristocrat Leisure Limited is expected to under-perform the Telephone. But the pink sheet apears to be less risky and, when comparing its historical volatility, Aristocrat Leisure Limited is 1.42 times less risky than Telephone. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Telephone and Data is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,544 in Telephone and Data on February 7, 2024 and sell it today you would earn a total of 26.00 from holding Telephone and Data or generate 1.68% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 95.45% |
Values | Daily Returns |
Aristocrat Leisure Limited vs. Telephone and Data
Performance |
Timeline |
Aristocrat Leisure |
Telephone and Data |
Aristocrat Leisure and Telephone Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Aristocrat Leisure and Telephone
The main advantage of trading using opposite Aristocrat Leisure and Telephone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Telephone 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 Telephone will offset losses from the drop in Telephone's long position.The idea behind Aristocrat Leisure Limited and Telephone and Data 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.Telephone vs. KT Corporation | Telephone vs. Telkom Indonesia Tbk | Telephone vs. Telefonica SA ADR | Telephone vs. Telefonica Brasil SA |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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