Correlation Between BRP and Academy Sports
Can any of the company-specific risk be diversified away by investing in both BRP and Academy Sports 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 BRP and Academy Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRP Inc and Academy Sports Outdoors, you can compare the effects of market volatilities on BRP and Academy Sports 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 BRP with a short position of Academy Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and Academy Sports.
Diversification Opportunities for BRP and Academy Sports
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BRP and Academy is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Academy Sports Outdoors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Academy Sports Outdoors and BRP 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 BRP Inc are associated (or correlated) with Academy Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Academy Sports Outdoors has no effect on the direction of BRP i.e., BRP and Academy Sports go up and down completely randomly.
Pair Corralation between BRP and Academy Sports
Given the investment horizon of 90 days BRP Inc is expected to under-perform the Academy Sports. But the stock apears to be less risky and, when comparing its historical volatility, BRP Inc is 1.02 times less risky than Academy Sports. The stock trades about -0.05 of its potential returns per unit of risk. The Academy Sports Outdoors is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 6,383 in Academy Sports Outdoors on November 3, 2024 and sell it today you would lose (1,152) from holding Academy Sports Outdoors or give up 18.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRP Inc vs. Academy Sports Outdoors
Performance |
| Timeline |
| BRP Inc |
| Academy Sports Outdoors |
BRP and Academy Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRP and Academy Sports
The main advantage of trading using opposite BRP and Academy Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, Academy Sports 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 Academy Sports will offset losses from the drop in Academy Sports' long position.The idea behind BRP Inc and Academy Sports Outdoors 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.| 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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