Correlation Between Academy Sports and NETGEAR

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

Diversification Opportunities for Academy Sports and NETGEAR

0.48

Correlation Coefficient

Academy Sports  NETGEAR

Very weak diversification

The 3 months correlation between Academy and NETGEAR is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Academy Sports i.e., Academy Sports and NETGEAR go up and down completely randomly.

Pair Corralation between Academy Sports and NETGEAR

Considering the 90-day investment horizon Academy Sports Outdoors is expected to under-perform the NETGEAR. In addition to that, Academy Sports is 1.52 times more volatile than NETGEAR. It trades about -0.16 of its total potential returns per unit of risk. NETGEAR is currently generating about -0.12 per unit of volatility. If you would invest  2,903  in NETGEAR on October 26, 2024 and sell it today you would lose (118.00) from holding NETGEAR or give up 4.06% of portfolio value over 90 days.

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

Academy Sports Outdoors  vs.  NETGEAR

Academy Sports Outdoors

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Academy Sports Outdoors are ranked lower than 5 (%) 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.

NETGEAR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Academy Sports and NETGEAR

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

The idea behind Academy Sports Outdoors and NETGEAR 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.