Correlation Between Academy Sports and 04010LAY9

Can any of the company-specific risk be diversified away by investing in both Academy Sports and 04010LAY9 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 04010LAY9 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 ARES CAPITAL PORATION, you can compare the effects of market volatilities on Academy Sports and 04010LAY9 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 04010LAY9. Check out your portfolio center. Please also check ongoing floating volatility patterns of Academy Sports and 04010LAY9.

Diversification Opportunities for Academy Sports and 04010LAY9

0.52

Correlation Coefficient

Academy Sports  04010LAY9

Very weak diversification

The 3 months correlation between Academy and 04010LAY9 is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and ARES CAPITAL PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARES CAPITAL PORATION 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 04010LAY9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARES CAPITAL PORATION has no effect on the direction of Academy Sports i.e., Academy Sports and 04010LAY9 go up and down completely randomly.

Pair Corralation between Academy Sports and 04010LAY9

Considering the 90-day investment horizon Academy Sports Outdoors is expected to under-perform the 04010LAY9. In addition to that, Academy Sports is 6.14 times more volatile than ARES CAPITAL PORATION. It trades about -0.06 of its total potential returns per unit of risk. ARES CAPITAL PORATION is currently generating about -0.07 per unit of volatility. If you would invest  9,810  in ARES CAPITAL PORATION on September 2, 2024 and sell it today you would lose (154.00) from holding ARES CAPITAL PORATION or give up 1.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Academy Sports Outdoors  vs.  ARES CAPITAL PORATION

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 unfluctuating 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.

ARES CAPITAL PORATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARES CAPITAL PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 04010LAY9 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Academy Sports and 04010LAY9

The main advantage of trading using opposite Academy Sports and 04010LAY9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Academy Sports position performs unexpectedly, 04010LAY9 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 04010LAY9 will offset losses from the drop in 04010LAY9's long position.

The idea behind Academy Sports Outdoors and ARES CAPITAL PORATION 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.