Correlation Between ATA Creativity and Continental

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

By analyzing existing cross correlation between ATA Creativity Global and Continental AG PK, you can compare the effects of market volatilities on ATA Creativity and Continental 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 ATA Creativity with a short position of Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATA Creativity and Continental.

Diversification Opportunities for ATA Creativity and Continental

-0.05

Correlation Coefficient

ATA Creativity  Continental

Good diversification

The 3 months correlation between ATA and Continental is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding ATA Creativity Global and Continental AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental AG PK and ATA Creativity 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 ATA Creativity Global are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental AG PK has no effect on the direction of ATA Creativity i.e., ATA Creativity and Continental go up and down completely randomly.

Pair Corralation between ATA Creativity and Continental

Given the investment horizon of 90 days ATA Creativity Global is expected to generate 1.41 times more return on investment than Continental. However, ATA Creativity is 1.41 times more volatile than Continental AG PK. It trades about 0.07 of its potential returns per unit of risk. Continental AG PK is currently generating about 0.03 per unit of risk. If you would invest  72.00  in ATA Creativity Global on September 26, 2024 and sell it today you would earn a total of  9.00  from holding ATA Creativity Global or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

ATA Creativity Global  vs.  Continental AG PK

ATA Creativity Global

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ATA Creativity Global are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, ATA Creativity reported solid returns over the last few months and may actually be approaching a breakup point.

Continental AG PK

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Continental AG PK are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Continental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ATA Creativity and Continental

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

The idea behind ATA Creativity Global and Continental AG PK 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.