Correlation Between Academy Sports and Alaska Air

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

Diversification Opportunities for Academy Sports and Alaska Air

AcademyAlaskaDiversified AwayAcademyAlaskaDiversified Away100%
0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Academy and Alaska is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Alaska Air Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Air Group 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 Alaska Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Air Group has no effect on the direction of Academy Sports i.e., Academy Sports and Alaska Air go up and down completely randomly.

Pair Corralation between Academy Sports and Alaska Air

Considering the 90-day investment horizon Academy Sports is expected to generate 6.2 times less return on investment than Alaska Air. But when comparing it to its historical volatility, Academy Sports Outdoors is 1.2 times less risky than Alaska Air. It trades about 0.05 of its potential returns per unit of risk. Alaska Air Group is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  4,540  in Alaska Air Group on October 15, 2024 and sell it today you would earn a total of  2,114  from holding Alaska Air Group or generate 46.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Academy Sports Outdoors  vs.  Alaska Air Group

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -1001020304050
JavaScript chart by amCharts 3.21.15ASO ALK
       Timeline  
Academy Sports Outdoors 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Academy Sports Outdoors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Academy Sports may actually be approaching a critical reversion point that can send shares even higher in February 2025.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan45505560
Alaska Air Group 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Alaska Air disclosed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan455055606570

Academy Sports and Alaska Air Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.6-4.94-3.29-1.630.01.613.315.016.78.4 0.020.030.040.050.060.070.080.09
JavaScript chart by amCharts 3.21.15ASO ALK
       Returns  

Pair Trading with Academy Sports and Alaska Air

The main advantage of trading using opposite Academy Sports and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Academy Sports position performs unexpectedly, Alaska Air 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 Alaska Air will offset losses from the drop in Alaska Air's long position.
The idea behind Academy Sports Outdoors and Alaska Air Group 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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