Correlation Between Academy Sports and Rocky Brands

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

Diversification Opportunities for Academy Sports and Rocky Brands

0.4

Correlation Coefficient

Academy Sports  Rocky Brands

Very weak diversification

The 3 months correlation between Academy and Rocky is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Rocky Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Brands 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 Rocky Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Brands has no effect on the direction of Academy Sports i.e., Academy Sports and Rocky Brands go up and down completely randomly.

Pair Corralation between Academy Sports and Rocky Brands

Considering the 90-day investment horizon Academy Sports Outdoors is expected to under-perform the Rocky Brands. In addition to that, Academy Sports is 1.01 times more volatile than Rocky Brands. It trades about -0.2 of its total potential returns per unit of risk. Rocky Brands is currently generating about -0.19 per unit of volatility. If you would invest  2,559  in Rocky Brands on November 28, 2024 and sell it today you would lose (201.00) from holding Rocky Brands or give up 7.85% 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.  Rocky Brands

Academy Sports Outdoors

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Academy Sports Outdoors are ranked lower than 3 (%) 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.

Rocky Brands

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rocky Brands are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Rocky Brands may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Academy Sports and Rocky Brands

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

The idea behind Academy Sports Outdoors and Rocky Brands 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.