Correlation Between Aristocrat Leisure and ANZ Group

Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and ANZ Group 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 ANZ Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aristocrat Leisure and ANZ Group Holdings, you can compare the effects of market volatilities on Aristocrat Leisure and ANZ Group 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 ANZ Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and ANZ Group.

Diversification Opportunities for Aristocrat Leisure and ANZ Group

0.38

Correlation Coefficient

Aristocrat Leisure  ANZ Group

Weak diversification

The 3 months correlation between Aristocrat and ANZ is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and ANZ Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANZ Group Holdings 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 ANZ Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANZ Group Holdings has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and ANZ Group go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and ANZ Group

Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 1.89 times more return on investment than ANZ Group. However, Aristocrat Leisure is 1.89 times more volatile than ANZ Group Holdings. It trades about 0.3 of its potential returns per unit of risk. ANZ Group Holdings is currently generating about 0.03 per unit of risk. If you would invest  5,403  in Aristocrat Leisure on September 4, 2024 and sell it today you would earn a total of  1,416  from holding Aristocrat Leisure or generate 26.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Aristocrat Leisure  vs.  ANZ Group Holdings

Aristocrat Leisure

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Aristocrat Leisure unveiled solid returns over the last few months and may actually be approaching a breakup point.

ANZ Group Holdings

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ANZ Group Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ANZ Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aristocrat Leisure and ANZ Group

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

The idea behind Aristocrat Leisure and ANZ Group Holdings 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.