Correlation Between American Public and ATA Creativity

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

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

Diversification Opportunities for American Public and ATA Creativity

0.33

Correlation Coefficient

American Public  ATA Creativity

Weak diversification

The 3 months correlation between American and ATA is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and ATA Creativity Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATA Creativity Global and American Public 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 American Public Education are associated (or correlated) with ATA Creativity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATA Creativity Global has no effect on the direction of American Public i.e., American Public and ATA Creativity go up and down completely randomly.

Pair Corralation between American Public and ATA Creativity

Given the investment horizon of 90 days American Public Education is expected to generate 1.84 times more return on investment than ATA Creativity. However, American Public is 1.84 times more volatile than ATA Creativity Global. It trades about 0.38 of its potential returns per unit of risk. ATA Creativity Global is currently generating about 0.16 per unit of risk. If you would invest  1,517  in American Public Education on September 1, 2024 and sell it today you would earn a total of  545.00  from holding American Public Education or generate 35.93% return on investment over 90 days.

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

American Public Education  vs.  ATA Creativity Global

American Public Education

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Public Education are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, American Public demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ATA Creativity Global

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATA Creativity Global are ranked lower than 14 (%) 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.

Pair Trading with American Public and ATA Creativity

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

The idea behind American Public Education and ATA Creativity Global 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.