Correlation Between Academy Sports and Soho House

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

Diversification Opportunities for Academy Sports and Soho House

0.33

Correlation Coefficient

Academy Sports  Soho House

Weak diversification

The 3 months correlation between Academy and Soho is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Soho House Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soho House 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 Soho House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soho House has no effect on the direction of Academy Sports i.e., Academy Sports and Soho House go up and down completely randomly.

Pair Corralation between Academy Sports and Soho House

Considering the 90-day investment horizon Academy Sports Outdoors is expected to under-perform the Soho House. But the stock apears to be less risky and, when comparing its historical volatility, Academy Sports Outdoors is 1.54 times less risky than Soho House. The stock trades about -0.13 of its potential returns per unit of risk. The Soho House Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  747.00  in Soho House Co on December 25, 2024 and sell it today you would lose (39.00) from holding Soho House Co or give up 5.22% of portfolio value over 90 days.

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

Academy Sports Outdoors  vs.  Soho House Co

Academy Sports Outdoors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Academy Sports Outdoors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Soho House

Risk-Adjusted Performance

Very Weak

Over the last 90 days Soho House Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Soho House is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Academy Sports and Soho House

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

The idea behind Academy Sports Outdoors and Soho House Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.