Correlation Between Academy Sports and Target

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

Diversification Opportunities for Academy Sports and Target

0.18

Correlation Coefficient

Academy Sports  Target

Average diversification

The 3 months correlation between Academy and Target is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Academy Sports i.e., Academy Sports and Target go up and down completely randomly.

Pair Corralation between Academy Sports and Target

Considering the 90-day investment horizon Academy Sports Outdoors is expected to generate 1.1 times more return on investment than Target. However, Academy Sports is 1.1 times more volatile than Target. It trades about 0.02 of its potential returns per unit of risk. Target is currently generating about 0.0 per unit of risk. If you would invest  5,491  in Academy Sports Outdoors on October 4, 2024 and sell it today you would earn a total of  262.00  from holding Academy Sports Outdoors or generate 4.77% return on investment over 90 days.

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

Academy Sports Outdoors  vs.  Target

Academy Sports Outdoors

Risk-Adjusted Performance

0 of 100

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 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.

Target

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Target has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Academy Sports and Target

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

The idea behind Academy Sports Outdoors and Target 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.