Correlation Between Bright Scholar and Academy Sports

Can any of the company-specific risk be diversified away by investing in both Bright Scholar and Academy Sports 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 Bright Scholar and Academy Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bright Scholar Education and Academy Sports Outdoors, you can compare the effects of market volatilities on Bright Scholar and Academy Sports 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 Bright Scholar with a short position of Academy Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Scholar and Academy Sports.

Diversification Opportunities for Bright Scholar and Academy Sports

0.42

Correlation Coefficient

Bright Scholar  Academy Sports

Very weak diversification

The 3 months correlation between Bright and Academy is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and Academy Sports Outdoors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Academy Sports Outdoors and Bright Scholar 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 Bright Scholar Education are associated (or correlated) with Academy Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Academy Sports Outdoors has no effect on the direction of Bright Scholar i.e., Bright Scholar and Academy Sports go up and down completely randomly.

Pair Corralation between Bright Scholar and Academy Sports

Given the investment horizon of 90 days Bright Scholar Education is expected to generate 2.57 times more return on investment than Academy Sports. However, Bright Scholar is 2.57 times more volatile than Academy Sports Outdoors. It trades about 0.01 of its potential returns per unit of risk. Academy Sports Outdoors is currently generating about -0.11 per unit of risk. If you would invest  192.00  in Bright Scholar Education on December 19, 2024 and sell it today you would lose (17.00) from holding Bright Scholar Education or give up 8.85% of portfolio value over 90 days.

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

Bright Scholar Education  vs.  Academy Sports Outdoors

Bright Scholar Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bright Scholar Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Bright Scholar is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Bright Scholar and Academy Sports

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

The idea behind Bright Scholar Education and Academy Sports Outdoors 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.