Correlation Between Academy Sports and NORFOLK

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

Diversification Opportunities for Academy Sports and NORFOLK

-0.39

Correlation Coefficient

Academy Sports  NORFOLK

Very good diversification

The 3 months correlation between Academy and NORFOLK is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and NORFOLK SOUTHN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORFOLK SOUTHN P 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 NORFOLK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORFOLK SOUTHN P has no effect on the direction of Academy Sports i.e., Academy Sports and NORFOLK go up and down completely randomly.

Pair Corralation between Academy Sports and NORFOLK

Considering the 90-day investment horizon Academy Sports is expected to generate 323.31 times less return on investment than NORFOLK. But when comparing it to its historical volatility, Academy Sports Outdoors is 30.21 times less risky than NORFOLK. It trades about 0.01 of its potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9,176  in NORFOLK SOUTHN P on October 26, 2024 and sell it today you would lose (307.00) from holding NORFOLK SOUTHN P or give up 3.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	39.27%
Values	Daily Returns

Academy Sports Outdoors  vs.  NORFOLK SOUTHN P

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.

NORFOLK SOUTHN P

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days NORFOLK SOUTHN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NORFOLK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Academy Sports and NORFOLK

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

The idea behind Academy Sports Outdoors and NORFOLK SOUTHN P 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.