Correlation Between Academy Sports and Best Buy
Can any of the company-specific risk be diversified away by investing in both Academy Sports and Best Buy 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 Best Buy 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 Best Buy Co, you can compare the effects of market volatilities on Academy Sports and Best Buy 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 Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Academy Sports and Best Buy.
Diversification Opportunities for Academy Sports and Best Buy
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Academy and Best is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Academy Sports i.e., Academy Sports and Best Buy go up and down completely randomly.
Pair Corralation between Academy Sports and Best Buy
Considering the 90-day investment horizon Academy Sports is expected to generate 2.3 times less return on investment than Best Buy. In addition to that, Academy Sports is 1.2 times more volatile than Best Buy Co. It trades about 0.01 of its total potential returns per unit of risk. Best Buy Co is currently generating about 0.03 per unit of volatility. If you would invest 7,450 in Best Buy Co on September 12, 2024 and sell it today you would earn a total of 1,330 from holding Best Buy Co or generate 17.85% 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. Best Buy Co
Performance |
| Timeline |
| Academy Sports Outdoors |
| Best Buy |
Academy Sports and Best Buy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Academy Sports and Best Buy
The main advantage of trading using opposite Academy Sports and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Academy Sports position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy'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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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