Correlation Between Academy Sports and Four Seasons

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

Diversification Opportunities for Academy Sports and Four Seasons

-0.26

Correlation Coefficient

Academy Sports  Four Seasons

Very good diversification

The 3 months correlation between Academy and Four is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Four Seasons Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Four Seasons Education 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 Four Seasons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Four Seasons Education has no effect on the direction of Academy Sports i.e., Academy Sports and Four Seasons go up and down completely randomly.

Pair Corralation between Academy Sports and Four Seasons

Considering the 90-day investment horizon Academy Sports is expected to generate 54.97 times less return on investment than Four Seasons. But when comparing it to its historical volatility, Academy Sports Outdoors is 21.12 times less risky than Four Seasons. It trades about 0.02 of its potential returns per unit of risk. Four Seasons Education is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  784.00  in Four Seasons Education on October 12, 2024 and sell it today you would earn a total of  216.00  from holding Four Seasons Education or generate 27.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.03%
Values	Daily Returns

Academy Sports Outdoors  vs.  Four Seasons Education

Academy Sports Outdoors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Academy Sports Outdoors are ranked lower than 6 (%) 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.

Four Seasons Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Four Seasons Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Academy Sports and Four Seasons

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

The idea behind Academy Sports Outdoors and Four Seasons Education 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.