Correlation Between Academy Sports and Advance Auto

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

Diversification Opportunities for Academy Sports and Advance Auto

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Academy and Advance is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports And and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts 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 And are associated (or correlated) with Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of Academy Sports i.e., Academy Sports and Advance Auto go up and down completely randomly.

Pair Corralation between Academy Sports and Advance Auto

Considering the 90-day investment horizon Academy Sports And is expected to under-perform the Advance Auto. In addition to that, Academy Sports is 1.08 times more volatile than Advance Auto Parts. It trades about -0.3 of its total potential returns per unit of risk. Advance Auto Parts is currently generating about -0.27 per unit of volatility. If you would invest  22,387  in Advance Auto Parts on February 22, 2022 and sell it today you would lose (4,198)  from holding Advance Auto Parts or give up 18.75% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Academy Sports And  vs.  Advance Auto Parts

 Performance (%) 
      Timeline 
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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Academy Price Channel

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 abnormal 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 Advance Auto Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Academy Sports and Advance Auto

The main advantage of trading using opposite Academy Sports and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Academy Sports position performs unexpectedly, Advance Auto 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 Advance Auto will offset losses from the drop in Advance Auto's long position.
The idea behind Academy Sports And and Advance Auto Parts 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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