Correlation Between Academy Sports and Chiba Bank

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

By analyzing existing cross correlation between Academy Sports Outdoors and Chiba Bank Ltd, you can compare the effects of market volatilities on Academy Sports and Chiba Bank 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 Academy Sports with a short position of Chiba Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Academy Sports and Chiba Bank.

Diversification Opportunities for Academy Sports and Chiba Bank

0.36

Correlation Coefficient

Academy Sports  Chiba Bank

Weak diversification

The 3 months correlation between Academy and Chiba is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Chiba Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chiba Bank and Academy Sports 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 Academy Sports Outdoors are associated (or correlated) with Chiba Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chiba Bank has no effect on the direction of Academy Sports i.e., Academy Sports and Chiba Bank go up and down completely randomly.

Pair Corralation between Academy Sports and Chiba Bank

Considering the 90-day investment horizon Academy Sports Outdoors is expected to generate 3.43 times more return on investment than Chiba Bank. However, Academy Sports is 3.43 times more volatile than Chiba Bank Ltd. It trades about 0.01 of its potential returns per unit of risk. Chiba Bank Ltd is currently generating about -0.13 per unit of risk. If you would invest  5,825  in Academy Sports Outdoors on September 28, 2024 and sell it today you would lose (5.00) from holding Academy Sports Outdoors or give up 0.09% of portfolio value over 90 days.

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

Academy Sports Outdoors  vs.  Chiba Bank Ltd

Academy Sports Outdoors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Academy Sports Outdoors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Academy Sports is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Chiba Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chiba Bank Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chiba Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Academy Sports and Chiba Bank

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

The idea behind Academy Sports Outdoors and Chiba Bank Ltd 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.