Correlation Between Academy Sports and Revolve Group

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

Diversification Opportunities for Academy Sports and Revolve Group

-0.59

Correlation Coefficient

Academy Sports  Revolve Group

Excellent diversification

The 3 months correlation between Academy and Revolve is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Revolve Group LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolve Group LLC 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 Revolve Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolve Group LLC has no effect on the direction of Academy Sports i.e., Academy Sports and Revolve Group go up and down completely randomly.

Pair Corralation between Academy Sports and Revolve Group

Considering the 90-day investment horizon Academy Sports Outdoors is expected to under-perform the Revolve Group. But the stock apears to be less risky and, when comparing its historical volatility, Academy Sports Outdoors is 1.96 times less risky than Revolve Group. The stock trades about -0.08 of its potential returns per unit of risk. The Revolve Group LLC is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,292  in Revolve Group LLC on August 30, 2024 and sell it today you would earn a total of  1,401  from holding Revolve Group LLC or generate 61.13% return on investment over 90 days.

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

Academy Sports Outdoors  vs.  Revolve Group LLC

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Revolve Group LLC

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Revolve Group LLC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Revolve Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Academy Sports and Revolve Group

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

The idea behind Academy Sports Outdoors and Revolve Group LLC 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.