Correlation Between Aristocrat Leisure and Centuria Industrial

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

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

Diversification Opportunities for Aristocrat Leisure and Centuria Industrial

-0.93

Correlation Coefficient

Aristocrat Leisure  Centuria Industrial

Pay attention - limited upside

The 3 months correlation between Aristocrat and Centuria is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure and Centuria Industrial Reit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centuria Industrial Reit 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 Centuria Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centuria Industrial Reit has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Centuria Industrial go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and Centuria Industrial

Assuming the 90 days trading horizon Aristocrat Leisure is expected to generate 1.54 times more return on investment than Centuria Industrial. However, Aristocrat Leisure is 1.54 times more volatile than Centuria Industrial Reit. It trades about 0.22 of its potential returns per unit of risk. Centuria Industrial Reit is currently generating about -0.19 per unit of risk. If you would invest  5,824  in Aristocrat Leisure on September 28, 2024 and sell it today you would earn a total of  1,053  from holding Aristocrat Leisure or generate 18.08% return on investment over 90 days.

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

Aristocrat Leisure  vs.  Centuria Industrial Reit

Aristocrat Leisure

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure are ranked lower than 16 (%) 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.

Centuria Industrial Reit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centuria Industrial Reit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Aristocrat Leisure and Centuria Industrial

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

The idea behind Aristocrat Leisure and Centuria Industrial Reit 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.