Correlation Between ARISTOCRAT LEISURE and TRAVEL +

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

By analyzing existing cross correlation between ARISTOCRAT LEISURE and TRAVEL LEISURE DL 01, you can compare the effects of market volatilities on ARISTOCRAT LEISURE and TRAVEL + 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 TRAVEL +. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARISTOCRAT LEISURE and TRAVEL +.

Diversification Opportunities for ARISTOCRAT LEISURE and TRAVEL +

0.51

Correlation Coefficient

ARISTOCRAT LEISURE  TRAVEL +

Very weak diversification

The 3 months correlation between ARISTOCRAT and TRAVEL is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ARISTOCRAT LEISURE and TRAVEL LEISURE DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVEL LEISURE DL 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 TRAVEL +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVEL LEISURE DL has no effect on the direction of ARISTOCRAT LEISURE i.e., ARISTOCRAT LEISURE and TRAVEL + go up and down completely randomly.

Pair Corralation between ARISTOCRAT LEISURE and TRAVEL +

Assuming the 90 days trading horizon ARISTOCRAT LEISURE is expected to generate 3.18 times less return on investment than TRAVEL +. But when comparing it to its historical volatility, ARISTOCRAT LEISURE is 1.42 times less risky than TRAVEL +. It trades about 0.13 of its potential returns per unit of risk. TRAVEL LEISURE DL 01 is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3,500  in TRAVEL LEISURE DL 01 on April 21, 2025 and sell it today you would earn a total of  1,360  from holding TRAVEL LEISURE DL 01 or generate 38.86% return on investment over 90 days.

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

ARISTOCRAT LEISURE  vs.  TRAVEL LEISURE DL 01

ARISTOCRAT LEISURE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ARISTOCRAT LEISURE may actually be approaching a critical reversion point that can send shares even higher in August 2025.

TRAVEL LEISURE DL

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ARISTOCRAT LEISURE and TRAVEL +

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

The idea behind ARISTOCRAT LEISURE and TRAVEL LEISURE DL 01 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.