Correlation Between ARISTOCRAT LEISURE and Chevron

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

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

Diversification Opportunities for ARISTOCRAT LEISURE and Chevron

0.97

Correlation Coefficient

ARISTOCRAT LEISURE  Chevron

Almost no diversification

The 3 months correlation between ARISTOCRAT and Chevron is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding ARISTOCRAT LEISURE and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron 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 Chevron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron has no effect on the direction of ARISTOCRAT LEISURE i.e., ARISTOCRAT LEISURE and Chevron go up and down completely randomly.

Pair Corralation between ARISTOCRAT LEISURE and Chevron

Assuming the 90 days trading horizon ARISTOCRAT LEISURE is expected to generate 0.79 times more return on investment than Chevron. However, ARISTOCRAT LEISURE is 1.26 times less risky than Chevron. It trades about 0.56 of its potential returns per unit of risk. Chevron is currently generating about 0.33 per unit of risk. If you would invest  3,722  in ARISTOCRAT LEISURE on September 5, 2024 and sell it today you would earn a total of  538.00  from holding ARISTOCRAT LEISURE or generate 14.45% return on investment over 90 days.

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

ARISTOCRAT LEISURE  vs.  Chevron

ARISTOCRAT LEISURE

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 34 (%) 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.

Chevron

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Chevron reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ARISTOCRAT LEISURE and Chevron

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

The idea behind ARISTOCRAT LEISURE and Chevron 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.