Correlation Between ARISTOCRAT LEISURE and DALATA HOTEL

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

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

Diversification Opportunities for ARISTOCRAT LEISURE and DALATA HOTEL

0.89

Correlation Coefficient

ARISTOCRAT LEISURE  DALATA HOTEL

Very poor diversification

The 3 months correlation between ARISTOCRAT and DALATA is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ARISTOCRAT LEISURE and DALATA HOTEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DALATA HOTEL 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 DALATA HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DALATA HOTEL has no effect on the direction of ARISTOCRAT LEISURE i.e., ARISTOCRAT LEISURE and DALATA HOTEL go up and down completely randomly.

Pair Corralation between ARISTOCRAT LEISURE and DALATA HOTEL

Assuming the 90 days trading horizon ARISTOCRAT LEISURE is expected to generate 5.65 times less return on investment than DALATA HOTEL. But when comparing it to its historical volatility, ARISTOCRAT LEISURE is 1.15 times less risky than DALATA HOTEL. It trades about 0.05 of its potential returns per unit of risk. DALATA HOTEL is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  416.00  in DALATA HOTEL on September 29, 2024 and sell it today you would earn a total of  27.00  from holding DALATA HOTEL or generate 6.49% return on investment over 90 days.

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

ARISTOCRAT LEISURE  vs.  DALATA HOTEL

ARISTOCRAT LEISURE

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, ARISTOCRAT LEISURE unveiled solid returns over the last few months and may actually be approaching a breakup point.

DALATA HOTEL

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DALATA HOTEL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, DALATA HOTEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ARISTOCRAT LEISURE and DALATA HOTEL

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

The idea behind ARISTOCRAT LEISURE and DALATA HOTEL 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.