Correlation Between Brunswick and Academy Sports

Can any of the company-specific risk be diversified away by investing in both Brunswick 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 Brunswick and Academy Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brunswick and Academy Sports Outdoors, you can compare the effects of market volatilities on Brunswick 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 Brunswick with a short position of Academy Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brunswick and Academy Sports.

Diversification Opportunities for Brunswick and Academy Sports

0.16

Correlation Coefficient

Brunswick  Academy Sports

Average diversification

The 3 months correlation between Brunswick and Academy is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick 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 Brunswick 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 Brunswick 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 Brunswick i.e., Brunswick and Academy Sports go up and down completely randomly.

Pair Corralation between Brunswick and Academy Sports

Allowing for the 90-day total investment horizon Brunswick is expected to generate 0.93 times more return on investment than Academy Sports. However, Brunswick is 1.08 times less risky than Academy Sports. It trades about 0.02 of its potential returns per unit of risk. Academy Sports Outdoors is currently generating about 0.0 per unit of risk. If you would invest  7,806  in Brunswick on August 25, 2024 and sell it today you would earn a total of  431.00  from holding Brunswick or generate 5.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Brunswick  vs.  Academy Sports Outdoors

Brunswick

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brunswick are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Brunswick is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Academy Sports Outdoors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Academy Sports Outdoors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Brunswick and Academy Sports

The main advantage of trading using opposite Brunswick and Academy Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brunswick 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 Brunswick 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.