Correlation Between Academy Sports and Alcon AG
Can any of the company-specific risk be diversified away by investing in both Academy Sports and Alcon AG 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 Alcon AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Academy Sports Outdoors and Alcon AG, you can compare the effects of market volatilities on Academy Sports and Alcon AG 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 Alcon AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Academy Sports and Alcon AG.
Diversification Opportunities for Academy Sports and Alcon AG
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Academy and Alcon is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Alcon AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcon AG 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 Outdoors are associated (or correlated) with Alcon AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcon AG has no effect on the direction of Academy Sports i.e., Academy Sports and Alcon AG go up and down completely randomly.
Pair Corralation between Academy Sports and Alcon AG
Considering the 90-day investment horizon Academy Sports Outdoors is expected to under-perform the Alcon AG. In addition to that, Academy Sports is 1.55 times more volatile than Alcon AG. It trades about -0.04 of its total potential returns per unit of risk. Alcon AG is currently generating about 0.06 per unit of volatility. If you would invest 8,015 in Alcon AG on September 3, 2024 and sell it today you would earn a total of 870.00 from holding Alcon AG or generate 10.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Academy Sports Outdoors vs. Alcon AG
Performance |
| Timeline |
| Academy Sports Outdoors |
| Alcon AG |
Academy Sports and Alcon AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Academy Sports and Alcon AG
The main advantage of trading using opposite Academy Sports and Alcon AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Academy Sports position performs unexpectedly, Alcon AG 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 Alcon AG will offset losses from the drop in Alcon AG's long position.| Academy Sports vs. Williams Sonoma | Academy Sports vs. AutoZone | Academy Sports vs. Ulta Beauty | Academy Sports vs. Best Buy Co |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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