Correlation Between ATA Creativity and Volkswagen

Can any of the company-specific risk be diversified away by investing in both ATA Creativity and Volkswagen 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 Volkswagen 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 Volkswagen AG 110, you can compare the effects of market volatilities on ATA Creativity and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATA Creativity and Volkswagen.

Diversification Opportunities for ATA Creativity and Volkswagen

-0.52

Correlation Coefficient

ATA Creativity  Volkswagen

Excellent diversification

The 3 months correlation between ATA and Volkswagen is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding ATA Creativity Global and Volkswagen AG 110 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 110 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG 110 has no effect on the direction of ATA Creativity i.e., ATA Creativity and Volkswagen go up and down completely randomly.

Pair Corralation between ATA Creativity and Volkswagen

Given the investment horizon of 90 days ATA Creativity Global is expected to generate 2.61 times more return on investment than Volkswagen. However, ATA Creativity is 2.61 times more volatile than Volkswagen AG 110. It trades about 0.01 of its potential returns per unit of risk. Volkswagen AG 110 is currently generating about -0.04 per unit of risk. If you would invest  126.00  in ATA Creativity Global on September 24, 2024 and sell it today you would lose (42.00) from holding ATA Creativity Global or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

ATA Creativity Global  vs.  Volkswagen AG 110

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.

Volkswagen AG 110

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG 110 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ATA Creativity and Volkswagen

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

The idea behind ATA Creativity Global and Volkswagen AG 110 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.