Correlation Between Academy Sports and Virgin Group

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

Diversification Opportunities for Academy Sports and Virgin Group

-0.08

Correlation Coefficient

Academy Sports  Virgin Group

Good diversification

The 3 months correlation between Academy and Virgin is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Virgin Group Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Group Acquisition 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 Virgin Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Group Acquisition has no effect on the direction of Academy Sports i.e., Academy Sports and Virgin Group go up and down completely randomly.

Pair Corralation between Academy Sports and Virgin Group

Considering the 90-day investment horizon Academy Sports is expected to generate 1.19 times less return on investment than Virgin Group. But when comparing it to its historical volatility, Academy Sports Outdoors is 1.83 times less risky than Virgin Group. It trades about 0.11 of its potential returns per unit of risk. Virgin Group Acquisition is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  131.00  in Virgin Group Acquisition on October 8, 2024 and sell it today you would earn a total of  12.00  from holding Virgin Group Acquisition or generate 9.16% return on investment over 90 days.

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

Academy Sports Outdoors  vs.  Virgin Group Acquisition

Academy Sports Outdoors

Risk-Adjusted Performance

2 of 100

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.

Virgin Group Acquisition

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Group Acquisition are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Virgin Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Academy Sports and Virgin Group

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

The idea behind Academy Sports Outdoors and Virgin Group Acquisition 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.