Correlation Between ADT and Academy Sports

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

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

Diversification Opportunities for ADT and Academy Sports

-0.69

Correlation Coefficient

ADT  Academy Sports

Excellent diversification

The 3 months correlation between ADT and Academy is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding ADT Inc and Academy Sports Outdoors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Academy Sports Outdoors and ADT 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 ADT Inc are associated (or correlated) with Academy Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Academy Sports Outdoors has no effect on the direction of ADT i.e., ADT and Academy Sports go up and down completely randomly.

Pair Corralation between ADT and Academy Sports

Considering the 90-day investment horizon ADT Inc is expected to generate 0.81 times more return on investment than Academy Sports. However, ADT Inc is 1.23 times less risky than Academy Sports. It trades about 0.15 of its potential returns per unit of risk. Academy Sports Outdoors is currently generating about -0.13 per unit of risk. If you would invest  692.00  in ADT Inc on December 27, 2024 and sell it today you would earn a total of  131.00  from holding ADT Inc or generate 18.93% return on investment over 90 days.

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

ADT Inc  vs.  Academy Sports Outdoors

ADT Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ADT Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, ADT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Academy Sports Outdoors

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ADT and Academy Sports

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

The idea behind ADT Inc and Academy Sports Outdoors 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.