Correlation Between Academy Sports and Safe

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

Diversification Opportunities for Academy Sports and Safe

0.31

Correlation Coefficient

Academy Sports  Safe

Weak diversification

The 3 months correlation between Academy and Safe is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Safe and Green in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safe and Green 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 Safe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safe and Green has no effect on the direction of Academy Sports i.e., Academy Sports and Safe go up and down completely randomly.

Pair Corralation between Academy Sports and Safe

Considering the 90-day investment horizon Academy Sports Outdoors is expected to generate 0.4 times more return on investment than Safe. However, Academy Sports Outdoors is 2.51 times less risky than Safe. It trades about 0.31 of its potential returns per unit of risk. Safe and Green is currently generating about 0.08 per unit of risk. If you would invest  5,031  in Academy Sports Outdoors on October 10, 2024 and sell it today you would earn a total of  726.00  from holding Academy Sports Outdoors or generate 14.43% return on investment over 90 days.

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

Academy Sports Outdoors  vs.  Safe and Green

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.

Safe and Green

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safe and Green 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Academy Sports and Safe

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

The idea behind Academy Sports Outdoors and Safe and Green 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.