Correlation Between ATA Creativity and British Amer

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

Diversification Opportunities for ATA Creativity and British Amer

0.17

Correlation Coefficient

ATA Creativity  British Amer

Average diversification

The 3 months correlation between ATA and British is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding ATA Creativity Global and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British Amer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of ATA Creativity i.e., ATA Creativity and British Amer go up and down completely randomly.

Pair Corralation between ATA Creativity and British Amer

Given the investment horizon of 90 days ATA Creativity Global is expected to under-perform the British Amer. In addition to that, ATA Creativity is 5.98 times more volatile than British American Tobacco. It trades about -0.12 of its total potential returns per unit of risk. British American Tobacco is currently generating about -0.08 per unit of volatility. If you would invest  3,005  in British American Tobacco on January 25, 2024 and sell it today you would lose (49.00) from holding British American Tobacco or give up 1.63% 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.  British American Tobacco

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 uncertain performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

British American Tobacco

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, British Amer is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ATA Creativity and British Amer

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

The idea behind ATA Creativity Global and British American Tobacco 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 Transaction History module to view history of all your transactions and understand their impact on performance.