Correlation Between Academy Sports and Tapestry

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

Diversification Opportunities for Academy Sports and Tapestry

0.12

Correlation Coefficient

Academy Sports  Tapestry

Average diversification

The 3 months correlation between Academy and Tapestry is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Tapestry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tapestry 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 Tapestry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tapestry has no effect on the direction of Academy Sports i.e., Academy Sports and Tapestry go up and down completely randomly.

Pair Corralation between Academy Sports and Tapestry

Considering the 90-day investment horizon Academy Sports Outdoors is expected to generate 1.6 times more return on investment than Tapestry. However, Academy Sports is 1.6 times more volatile than Tapestry. It trades about 0.35 of its potential returns per unit of risk. Tapestry is currently generating about 0.34 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  855.00  from holding Academy Sports Outdoors or generate 16.99% 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.  Tapestry

Academy Sports Outdoors

Risk-Adjusted Performance

5 of 100

Modest

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.

Tapestry

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Tapestry reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Academy Sports and Tapestry

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

The idea behind Academy Sports Outdoors and Tapestry 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.