Correlation Between Academy Sports and Papaya Growth

Can any of the company-specific risk be diversified away by investing in both Academy Sports and Papaya Growth 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 Papaya Growth 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 Papaya Growth Opportunity, you can compare the effects of market volatilities on Academy Sports and Papaya Growth 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 Papaya Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Academy Sports and Papaya Growth.

Diversification Opportunities for Academy Sports and Papaya Growth

-0.22

Correlation Coefficient

Academy Sports  Papaya Growth

Very good diversification

The 3 months correlation between Academy and Papaya is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Papaya Growth Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papaya Growth Opportunity 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 Papaya Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papaya Growth Opportunity has no effect on the direction of Academy Sports i.e., Academy Sports and Papaya Growth go up and down completely randomly.

Pair Corralation between Academy Sports and Papaya Growth

Considering the 90-day investment horizon Academy Sports Outdoors is expected to generate 2.14 times more return on investment than Papaya Growth. However, Academy Sports is 2.14 times more volatile than Papaya Growth Opportunity. It trades about 0.06 of its potential returns per unit of risk. Papaya Growth Opportunity is currently generating about -0.03 per unit of risk. If you would invest  5,047  in Academy Sports Outdoors on September 27, 2024 and sell it today you would earn a total of  773.00  from holding Academy Sports Outdoors or generate 15.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Academy Sports Outdoors  vs.  Papaya Growth Opportunity

Academy Sports Outdoors

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Academy Sports Outdoors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Papaya Growth Opportunity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Papaya Growth Opportunity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Papaya Growth is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Academy Sports and Papaya Growth

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

The idea behind Academy Sports Outdoors and Papaya Growth Opportunity 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.