Correlation Between Academy Sports and Ambev SA

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

Diversification Opportunities for Academy Sports and Ambev SA

0.51

Correlation Coefficient

Academy Sports  Ambev SA

Very weak diversification

The 3 months correlation between Academy and Ambev is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Ambev SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA ADR 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 Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA ADR has no effect on the direction of Academy Sports i.e., Academy Sports and Ambev SA go up and down completely randomly.

Pair Corralation between Academy Sports and Ambev SA

Considering the 90-day investment horizon Academy Sports Outdoors is expected to generate 0.82 times more return on investment than Ambev SA. However, Academy Sports Outdoors is 1.22 times less risky than Ambev SA. It trades about 0.49 of its potential returns per unit of risk. Ambev SA ADR is currently generating about -0.12 per unit of risk. If you would invest  4,517  in Academy Sports Outdoors on September 21, 2024 and sell it today you would earn a total of  1,100  from holding Academy Sports Outdoors or generate 24.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Academy Sports Outdoors  vs.  Ambev SA ADR

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.

Ambev SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambev SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Academy Sports and Ambev SA

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

The idea behind Academy Sports Outdoors and Ambev SA ADR 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.