Correlation Between Advance Auto and Academy Sports

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Can any of the company-specific risk be diversified away by investing in both Advance Auto 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 Advance Auto and Academy Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advance Auto Parts and Academy Sports And, you can compare the effects of market volatilities on Advance Auto 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 Advance Auto with a short position of Academy Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Academy Sports.

Diversification Opportunities for Advance Auto and Academy Sports

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Advance and Academy is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Academy Sports And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Academy Sports And and Advance Auto 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 Advance Auto Parts 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 And has no effect on the direction of Advance Auto i.e., Advance Auto and Academy Sports go up and down completely randomly.

Pair Corralation between Advance Auto and Academy Sports

Considering the 90-day investment horizon Advance Auto is expected to generate 3.61 times less return on investment than Academy Sports. But when comparing it to its historical volatility, Advance Auto Parts is 1.8 times less risky than Academy Sports. It trades about 0.04 of its potential returns per unit of risk. Academy Sports And is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,296  in Academy Sports And on February 20, 2022 and sell it today you would earn a total of  1,787  from holding Academy Sports And or generate 137.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy86.22%
ValuesDaily Returns

Advance Auto Parts  vs.  Academy Sports And

 Performance (%) 
      Timeline 
Advance Auto Parts 
Advance Performance
0 of 100
Over the last 90 days Advance Auto Parts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 insiders.

Advance Price Channel

Academy Sports And 
Academy Performance
0 of 100
Over the last 90 days Academy Sports And has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Academy Sports is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Academy Price Channel

Advance Auto and Academy Sports Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Advance Auto and Academy Sports

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

Advance Auto Parts

Pair trading matchups for Advance Auto

The idea behind Advance Auto Parts and Academy Sports And 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.

Academy Sports And

Pair trading matchups for Academy Sports

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 Stock Screener module to find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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