Correlation Between Academy Sports and Cato
Can any of the company-specific risk be diversified away by investing in both Academy Sports and Cato 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 Cato 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 Cato Corporation, you can compare the effects of market volatilities on Academy Sports and Cato 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 Cato. Check out your portfolio center. Please also check ongoing floating volatility patterns of Academy Sports and Cato.
Diversification Opportunities for Academy Sports and Cato
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Academy and Cato is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato 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 Cato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cato has no effect on the direction of Academy Sports i.e., Academy Sports and Cato go up and down completely randomly.
Pair Corralation between Academy Sports and Cato
Considering the 90-day investment horizon Academy Sports Outdoors is expected to generate 0.84 times more return on investment than Cato. However, Academy Sports Outdoors is 1.19 times less risky than Cato. It trades about -0.01 of its potential returns per unit of risk. Cato Corporation is currently generating about -0.05 per unit of risk. If you would invest 6,052 in Academy Sports Outdoors on August 27, 2024 and sell it today you would lose (1,388) from holding Academy Sports Outdoors or give up 22.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Academy Sports Outdoors vs. Cato Corp.
Performance |
| Timeline |
| Academy Sports Outdoors |
| Cato |
Academy Sports and Cato Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Academy Sports and Cato
The main advantage of trading using opposite Academy Sports and Cato positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Academy Sports position performs unexpectedly, Cato 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 Cato will offset losses from the drop in Cato's long position.| Academy Sports vs. Oriental Culture Holding | Academy Sports vs. Hour Loop | Academy Sports vs. Qurate Retail Series | Academy Sports vs. Emerge Commerce |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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