Correlation Between Academy Sports and GENERAL

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

Diversification Opportunities for Academy Sports and GENERAL

-0.45

Correlation Coefficient

Academy Sports  GENERAL

Very good diversification

The 3 months correlation between Academy and GENERAL is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Academy Sports i.e., Academy Sports and GENERAL go up and down completely randomly.

Pair Corralation between Academy Sports and GENERAL

Considering the 90-day investment horizon Academy Sports Outdoors is expected to generate 2.28 times more return on investment than GENERAL. However, Academy Sports is 2.28 times more volatile than GENERAL ELEC CAP. It trades about -0.07 of its potential returns per unit of risk. GENERAL ELEC CAP is currently generating about -0.24 per unit of risk. If you would invest  5,937  in Academy Sports Outdoors on September 14, 2024 and sell it today you would lose (607.00) from holding Academy Sports Outdoors or give up 10.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	19.05%
Values	Daily Returns

Academy Sports Outdoors  vs.  GENERAL ELEC CAP

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 inconsistent 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.

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for GENERAL ELEC CAP investors.

Pair Trading with Academy Sports and GENERAL

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

The idea behind Academy Sports Outdoors and GENERAL ELEC CAP 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.