Correlation Between ATA Creativity and BYD Co

Can any of the company-specific risk be diversified away by investing in both ATA Creativity and BYD Co 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 BYD Co 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 BYD Co Ltd, you can compare the effects of market volatilities on ATA Creativity and BYD Co 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 BYD Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATA Creativity and BYD Co.

Diversification Opportunities for ATA Creativity and BYD Co

0.38

Correlation Coefficient

ATA Creativity  BYD Co

Weak diversification

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

Pair Corralation between ATA Creativity and BYD Co

Given the investment horizon of 90 days ATA Creativity Global is expected to under-perform the BYD Co. In addition to that, ATA Creativity is 1.29 times more volatile than BYD Co Ltd. It trades about -0.27 of its total potential returns per unit of risk. BYD Co Ltd is currently generating about 0.04 per unit of volatility. If you would invest  6,763  in BYD Co Ltd on September 22, 2024 and sell it today you would earn a total of  106.00  from holding BYD Co Ltd or generate 1.57% return on investment over 90 days.

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

ATA Creativity Global  vs.  BYD Co Ltd

ATA Creativity Global

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATA Creativity Global are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, ATA Creativity reported solid returns over the last few months and may actually be approaching a breakup point.

BYD Co

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, BYD Co may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ATA Creativity and BYD Co

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

The idea behind ATA Creativity Global and BYD Co Ltd 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.