Correlation Between Academy Sports and Daiwa Securities

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

Diversification Opportunities for Academy Sports and Daiwa Securities

-0.69

Correlation Coefficient

Academy Sports  Daiwa Securities

Excellent diversification

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

Pair Corralation between Academy Sports and Daiwa Securities

Considering the 90-day investment horizon Academy Sports is expected to generate 2.51 times less return on investment than Daiwa Securities. But when comparing it to its historical volatility, Academy Sports Outdoors is 1.11 times less risky than Daiwa Securities. It trades about 0.02 of its potential returns per unit of risk. Daiwa Securities Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  448.00  in Daiwa Securities Group on September 26, 2024 and sell it today you would earn a total of  202.00  from holding Daiwa Securities Group or generate 45.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	73.99%
Values	Daily Returns

Academy Sports Outdoors  vs.  Daiwa Securities Group

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 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.

Daiwa Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiwa Securities Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Daiwa Securities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Academy Sports and Daiwa Securities

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

The idea behind Academy Sports Outdoors and Daiwa Securities 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.