Correlation Between Academy Sports and MYT Netherlands

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

Diversification Opportunities for Academy Sports and MYT Netherlands

0.43

Correlation Coefficient

Academy Sports  MYT Netherlands

Very weak diversification

The 3 months correlation between Academy and MYT is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and MYT Netherlands Parent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MYT Netherlands Parent 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 MYT Netherlands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MYT Netherlands Parent has no effect on the direction of Academy Sports i.e., Academy Sports and MYT Netherlands go up and down completely randomly.

Pair Corralation between Academy Sports and MYT Netherlands

Considering the 90-day investment horizon Academy Sports is expected to generate 4.18 times less return on investment than MYT Netherlands. But when comparing it to its historical volatility, Academy Sports Outdoors is 1.77 times less risky than MYT Netherlands. It trades about 0.05 of its potential returns per unit of risk. MYT Netherlands Parent is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  709.00  in MYT Netherlands Parent on October 26, 2024 and sell it today you would earn a total of  218.00  from holding MYT Netherlands Parent or generate 30.75% return on investment over 90 days.

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

Academy Sports Outdoors  vs.  MYT Netherlands Parent

Academy Sports Outdoors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Academy Sports Outdoors are ranked lower than 4 (%) 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.

MYT Netherlands Parent

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MYT Netherlands Parent are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, MYT Netherlands exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Academy Sports and MYT Netherlands

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

The idea behind Academy Sports Outdoors and MYT Netherlands Parent 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.