Correlation Between Academy Sports and Home Depot
Can any of the company-specific risk be diversified away by investing in both Academy Sports and Home Depot 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 Home Depot 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 Home Depot, you can compare the effects of market volatilities on Academy Sports and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Academy Sports and Home Depot.
Diversification Opportunities for Academy Sports and Home Depot
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Academy and Home is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Academy Sports i.e., Academy Sports and Home Depot go up and down completely randomly.
Pair Corralation between Academy Sports and Home Depot
Considering the 90-day investment horizon Academy Sports Outdoors is expected to under-perform the Home Depot. In addition to that, Academy Sports is 1.74 times more volatile than Home Depot. It trades about -0.03 of its total potential returns per unit of risk. Home Depot is currently generating about 0.05 per unit of volatility. If you would invest 35,816 in Home Depot on December 5, 2024 and sell it today you would earn a total of 2,352 from holding Home Depot or generate 6.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Academy Sports Outdoors vs. Home Depot
Performance |
| Timeline |
| Academy Sports Outdoors |
| Home Depot |
Academy Sports and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Academy Sports and Home Depot
The main advantage of trading using opposite Academy Sports and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Academy Sports position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Academy Sports vs. Williams Sonoma | ||
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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