Correlation Between Highway Holdings and Academy Sports

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

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

Diversification Opportunities for Highway Holdings and Academy Sports

0.13

Correlation Coefficient

Highway Holdings  Academy Sports

Average diversification

The 3 months correlation between Highway and Academy is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited 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 Highway Holdings 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 Highway Holdings Limited 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 Highway Holdings i.e., Highway Holdings and Academy Sports go up and down completely randomly.

Pair Corralation between Highway Holdings and Academy Sports

Given the investment horizon of 90 days Highway Holdings is expected to generate 2.86 times less return on investment than Academy Sports. But when comparing it to its historical volatility, Highway Holdings Limited is 1.51 times less risky than Academy Sports. It trades about 0.16 of its potential returns per unit of risk. Academy Sports Outdoors is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  5,031  in Academy Sports Outdoors on October 10, 2024 and sell it today you would earn a total of  726.00  from holding Academy Sports Outdoors or generate 14.43% return on investment over 90 days.

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

Highway Holdings Limited  vs.  Academy Sports Outdoors

Highway Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Highway Holdings Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Highway Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Highway Holdings and Academy Sports

The main advantage of trading using opposite Highway Holdings and Academy Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings 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 Highway Holdings Limited 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.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.