Correlation Between Aristocrat Leisure and Data3

Can any of the company-specific risk be diversified away by investing in both Aristocrat Leisure and Data3 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 Data3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aristocrat Leisure Limited and Data3 Limited, you can compare the effects of market volatilities on Aristocrat Leisure and Data3 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 Data3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Data3.

Diversification Opportunities for Aristocrat Leisure and Data3

0.38

Correlation Coefficient

Aristocrat Leisure  Data3

Weak diversification

The 3 months correlation between Aristocrat and Data3 is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure Limited and Data3 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data3 Limited 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 Limited are associated (or correlated) with Data3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data3 Limited has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Data3 go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and Data3

Assuming the 90 days horizon Aristocrat Leisure Limited is expected to generate 1.11 times more return on investment than Data3. However, Aristocrat Leisure is 1.11 times more volatile than Data3 Limited. It trades about 0.09 of its potential returns per unit of risk. Data3 Limited is currently generating about 0.1 per unit of risk. If you would invest  3,376  in Aristocrat Leisure Limited on April 20, 2025 and sell it today you would earn a total of  344.00  from holding Aristocrat Leisure Limited or generate 10.19% return on investment over 90 days.

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

Aristocrat Leisure Limited  vs.  Data3 Limited

Aristocrat Leisure

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aristocrat Leisure may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Data3 Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Data3 Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Data3 may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Aristocrat Leisure and Data3

The main advantage of trading using opposite Aristocrat Leisure and Data3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure position performs unexpectedly, Data3 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 Data3 will offset losses from the drop in Data3's long position.

The idea behind Aristocrat Leisure Limited and Data3 Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.