Correlation Between ATA Creativity and Sodexo PK

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

Diversification Opportunities for ATA Creativity and Sodexo PK

0.13

Correlation Coefficient

ATA Creativity  Sodexo PK

Average diversification

The 3 months correlation between ATA and Sodexo is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding ATA Creativity Global and Sodexo PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sodexo 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 Sodexo PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sodexo PK has no effect on the direction of ATA Creativity i.e., ATA Creativity and Sodexo PK go up and down completely randomly.

Pair Corralation between ATA Creativity and Sodexo PK

Given the investment horizon of 90 days ATA Creativity Global is expected to under-perform the Sodexo PK. In addition to that, ATA Creativity is 2.33 times more volatile than Sodexo PK. It trades about -0.29 of its total potential returns per unit of risk. Sodexo PK is currently generating about -0.18 per unit of volatility. If you would invest  1,705  in Sodexo PK on September 24, 2024 and sell it today you would lose (85.00) from holding Sodexo PK or give up 4.99% of portfolio value over 90 days.

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

ATA Creativity Global  vs.  Sodexo PK

ATA Creativity Global

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATA Creativity Global are ranked lower than 9 (%) 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.

Sodexo PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sodexo PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sodexo PK 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 Sodexo PK

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

The idea behind ATA Creativity Global and Sodexo 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 Valuation module to check real value of public entities based on technical and fundamental data.