Correlation Between Academy Sports and BrightSpring Health

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

Diversification Opportunities for Academy Sports and BrightSpring Health

-0.78

Correlation Coefficient

Academy Sports  BrightSpring Health

Pay attention - limited upside

The 3 months correlation between Academy and BrightSpring is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and BrightSpring Health Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrightSpring Health 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 BrightSpring Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrightSpring Health has no effect on the direction of Academy Sports i.e., Academy Sports and BrightSpring Health go up and down completely randomly.

Pair Corralation between Academy Sports and BrightSpring Health

Considering the 90-day investment horizon Academy Sports Outdoors is expected to under-perform the BrightSpring Health. But the stock apears to be less risky and, when comparing its historical volatility, Academy Sports Outdoors is 1.08 times less risky than BrightSpring Health. The stock trades about -0.07 of its potential returns per unit of risk. The BrightSpring Health Services, is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,311  in BrightSpring Health Services, on September 14, 2024 and sell it today you would earn a total of  1,248  from holding BrightSpring Health Services, or generate 23.5% return on investment over 90 days.

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

Academy Sports Outdoors  vs.  BrightSpring Health Services,

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.

BrightSpring Health

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Academy Sports and BrightSpring Health

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

The idea behind Academy Sports Outdoors and BrightSpring Health Services, 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.