Correlation Between Academy Sports and Digi International

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

Diversification Opportunities for Academy Sports and Digi International

-0.6

Correlation Coefficient

Academy Sports  Digi International

Excellent diversification

The 3 months correlation between Academy and Digi is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International 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 Digi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi International has no effect on the direction of Academy Sports i.e., Academy Sports and Digi International go up and down completely randomly.

Pair Corralation between Academy Sports and Digi International

Considering the 90-day investment horizon Academy Sports Outdoors is expected to generate 1.03 times more return on investment than Digi International. However, Academy Sports is 1.03 times more volatile than Digi International. It trades about 0.61 of its potential returns per unit of risk. Digi International is currently generating about -0.14 per unit of risk. If you would invest  4,792  in Academy Sports Outdoors on September 27, 2024 and sell it today you would earn a total of  1,325  from holding Academy Sports Outdoors or generate 27.65% 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.  Digi International

Academy Sports Outdoors

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Academy Sports Outdoors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Academy Sports is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Digi International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Academy Sports and Digi International

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

The idea behind Academy Sports Outdoors and Digi International 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.

Check out your portfolio center.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.