Correlation Between Freedom Bank and Academy Sports

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

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

Diversification Opportunities for Freedom Bank and Academy Sports

0.19

Correlation Coefficient

Freedom Bank  Academy Sports

Average diversification

The 3 months correlation between Freedom and Academy is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Bank of 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 Freedom Bank 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 Freedom Bank of 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 Freedom Bank i.e., Freedom Bank and Academy Sports go up and down completely randomly.

Pair Corralation between Freedom Bank and Academy Sports

Given the investment horizon of 90 days Freedom Bank is expected to generate 18.48 times less return on investment than Academy Sports. But when comparing it to its historical volatility, Freedom Bank of is 2.67 times less risky than Academy Sports. It trades about 0.04 of its potential returns per unit of risk. Academy Sports Outdoors is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  4,780  in Academy Sports Outdoors on September 16, 2024 and sell it today you would earn a total of  651.00  from holding Academy Sports Outdoors or generate 13.62% return on investment over 90 days.

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

Freedom Bank of  vs.  Academy Sports Outdoors

Freedom Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Bank of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Freedom Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Academy Sports Outdoors

Risk-Adjusted Performance

0 of 100

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 latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Freedom Bank and Academy Sports

The main advantage of trading using opposite Freedom Bank and Academy Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Bank 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 Freedom Bank of 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.