Correlation Between Academy Sports and Weibo Corp

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

Diversification Opportunities for Academy Sports and Weibo Corp

0.49

Correlation Coefficient

Academy Sports  Weibo Corp

Very weak diversification

The 3 months correlation between Academy and Weibo is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp 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 Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of Academy Sports i.e., Academy Sports and Weibo Corp go up and down completely randomly.

Pair Corralation between Academy Sports and Weibo Corp

Considering the 90-day investment horizon Academy Sports Outdoors is expected to generate 0.75 times more return on investment than Weibo Corp. However, Academy Sports Outdoors is 1.33 times less risky than Weibo Corp. It trades about 0.01 of its potential returns per unit of risk. Weibo Corp is currently generating about -0.03 per unit of risk. If you would invest  5,511  in Academy Sports Outdoors on October 5, 2024 and sell it today you would earn a total of  143.00  from holding Academy Sports Outdoors or generate 2.59% return on investment over 90 days.

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

Academy Sports Outdoors  vs.  Weibo Corp

Academy Sports Outdoors

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Academy Sports Outdoors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Weibo Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weibo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Academy Sports and Weibo Corp

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

The idea behind Academy Sports Outdoors and Weibo Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.