Correlation Between Academy Sports and Wyndham

Can any of the company-specific risk be diversified away by investing in both Academy Sports and Wyndham 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 Wyndham 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 Wyndham Destinations 51, you can compare the effects of market volatilities on Academy Sports and Wyndham 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 Wyndham. Check out your portfolio center. Please also check ongoing floating volatility patterns of Academy Sports and Wyndham.

Diversification Opportunities for Academy Sports and Wyndham

0.15

Correlation Coefficient

Academy Sports  Wyndham

Average diversification

The 3 months correlation between Academy and Wyndham is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Wyndham Destinations 51 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wyndham Destinations 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 Wyndham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wyndham Destinations has no effect on the direction of Academy Sports i.e., Academy Sports and Wyndham go up and down completely randomly.

Pair Corralation between Academy Sports and Wyndham

Considering the 90-day investment horizon Academy Sports Outdoors is expected to under-perform the Wyndham. In addition to that, Academy Sports is 11.11 times more volatile than Wyndham Destinations 51. It trades about -0.13 of its total potential returns per unit of risk. Wyndham Destinations 51 is currently generating about 0.02 per unit of volatility. If you would invest  10,019  in Wyndham Destinations 51 on December 24, 2024 and sell it today you would earn a total of  31.00  from holding Wyndham Destinations 51 or generate 0.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Academy Sports Outdoors  vs.  Wyndham Destinations 51

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.

Wyndham Destinations

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Destinations 51 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Wyndham 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 Wyndham

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

The idea behind Academy Sports Outdoors and Wyndham Destinations 51 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.