Correlation Between Caltagirone SpA and ARISTOCRAT LEISURE

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

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

Diversification Opportunities for Caltagirone SpA and ARISTOCRAT LEISURE

0.86

Correlation Coefficient

Caltagirone SpA  ARISTOCRAT LEISURE

Very poor diversification

The 3 months correlation between Caltagirone and ARISTOCRAT is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Caltagirone SpA and ARISTOCRAT LEISURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARISTOCRAT LEISURE and Caltagirone SpA 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 Caltagirone SpA are associated (or correlated) with ARISTOCRAT LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARISTOCRAT LEISURE has no effect on the direction of Caltagirone SpA i.e., Caltagirone SpA and ARISTOCRAT LEISURE go up and down completely randomly.

Pair Corralation between Caltagirone SpA and ARISTOCRAT LEISURE

Assuming the 90 days trading horizon Caltagirone SpA is expected to generate 1.93 times more return on investment than ARISTOCRAT LEISURE. However, Caltagirone SpA is 1.93 times more volatile than ARISTOCRAT LEISURE. It trades about 0.09 of its potential returns per unit of risk. ARISTOCRAT LEISURE is currently generating about 0.15 per unit of risk. If you would invest  261.00  in Caltagirone SpA on September 14, 2024 and sell it today you would earn a total of  347.00  from holding Caltagirone SpA or generate 132.95% return on investment over 90 days.

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

Caltagirone SpA  vs.  ARISTOCRAT LEISURE

Caltagirone SpA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Caltagirone SpA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caltagirone SpA unveiled solid returns over the last few months and may actually be approaching a breakup point.

ARISTOCRAT LEISURE

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ARISTOCRAT LEISURE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caltagirone SpA and ARISTOCRAT LEISURE

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

The idea behind Caltagirone SpA and ARISTOCRAT LEISURE 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.