Correlation Between ARISTOCRAT LEISURE and ARDAGH METAL

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

By analyzing existing cross correlation between ARISTOCRAT LEISURE and ARDAGH METAL PACDL 0001, you can compare the effects of market volatilities on ARISTOCRAT LEISURE and ARDAGH METAL 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 ARDAGH METAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARISTOCRAT LEISURE and ARDAGH METAL.

Diversification Opportunities for ARISTOCRAT LEISURE and ARDAGH METAL

0.54

Correlation Coefficient

ARISTOCRAT LEISURE  ARDAGH METAL

Very weak diversification

The 3 months correlation between ARISTOCRAT and ARDAGH is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding ARISTOCRAT LEISURE and ARDAGH METAL PACDL 0001 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARDAGH METAL PACDL 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 are associated (or correlated) with ARDAGH METAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARDAGH METAL PACDL has no effect on the direction of ARISTOCRAT LEISURE i.e., ARISTOCRAT LEISURE and ARDAGH METAL go up and down completely randomly.

Pair Corralation between ARISTOCRAT LEISURE and ARDAGH METAL

Assuming the 90 days trading horizon ARISTOCRAT LEISURE is expected to generate 0.4 times more return on investment than ARDAGH METAL. However, ARISTOCRAT LEISURE is 2.49 times less risky than ARDAGH METAL. It trades about 0.18 of its potential returns per unit of risk. ARDAGH METAL PACDL 0001 is currently generating about 0.02 per unit of risk. If you would invest  2,365  in ARISTOCRAT LEISURE on September 2, 2024 and sell it today you would earn a total of  1,795  from holding ARISTOCRAT LEISURE or generate 75.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ARISTOCRAT LEISURE  vs.  ARDAGH METAL PACDL 0001

ARISTOCRAT LEISURE

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, ARISTOCRAT LEISURE unveiled solid returns over the last few months and may actually be approaching a breakup point.

ARDAGH METAL PACDL

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ARDAGH METAL PACDL 0001 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ARDAGH METAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ARISTOCRAT LEISURE and ARDAGH METAL

The main advantage of trading using opposite ARISTOCRAT LEISURE and ARDAGH METAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARISTOCRAT LEISURE position performs unexpectedly, ARDAGH METAL 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 ARDAGH METAL will offset losses from the drop in ARDAGH METAL's long position.

The idea behind ARISTOCRAT LEISURE and ARDAGH METAL PACDL 0001 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.