Correlation Between Reitmans and ATA Creativity

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

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

Diversification Opportunities for Reitmans and ATA Creativity

0.39

Correlation Coefficient

Reitmans  ATA Creativity

Weak diversification

The 3 months correlation between Reitmans and ATA is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Reitmans Limited 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 Reitmans 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 Reitmans Limited 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 Reitmans i.e., Reitmans and ATA Creativity go up and down completely randomly.

Pair Corralation between Reitmans and ATA Creativity

Assuming the 90 days horizon Reitmans Limited is expected to generate 0.57 times more return on investment than ATA Creativity. However, Reitmans Limited is 1.76 times less risky than ATA Creativity. It trades about -0.3 of its potential returns per unit of risk. ATA Creativity Global is currently generating about -0.4 per unit of risk. If you would invest  191.00  in Reitmans Limited on September 29, 2024 and sell it today you would lose (21.00) from holding Reitmans Limited or give up 10.99% of portfolio value over 90 days.

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

Reitmans Limited  vs.  ATA Creativity Global

Reitmans Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reitmans Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ATA Creativity Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATA Creativity Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, ATA Creativity is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Reitmans and ATA Creativity

The main advantage of trading using opposite Reitmans and ATA Creativity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reitmans 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 Reitmans Limited 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.