Correlation Between Academy Sports and United Guardian

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

Diversification Opportunities for Academy Sports and United Guardian

-0.3

Correlation Coefficient

Academy Sports  United Guardian

Very good diversification

The 3 months correlation between Academy and United is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Academy Sports i.e., Academy Sports and United Guardian go up and down completely randomly.

Pair Corralation between Academy Sports and United Guardian

Considering the 90-day investment horizon Academy Sports Outdoors is expected to generate 0.62 times more return on investment than United Guardian. However, Academy Sports Outdoors is 1.62 times less risky than United Guardian. It trades about -0.14 of its potential returns per unit of risk. United Guardian is currently generating about -0.21 per unit of risk. If you would invest  5,286  in Academy Sports Outdoors on December 10, 2024 and sell it today you would lose (230.00) from holding Academy Sports Outdoors or give up 4.35% of portfolio value over 90 days.

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

Academy Sports Outdoors  vs.  United Guardian

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 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.

United Guardian

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Guardian are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, United Guardian may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Academy Sports and United Guardian

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

The idea behind Academy Sports Outdoors and United Guardian 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.