Correlation Between Academy Sports and Griffon

Can any of the company-specific risk be diversified away by investing in both Academy Sports and Griffon 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 Griffon 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 Griffon 575, you can compare the effects of market volatilities on Academy Sports and Griffon 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 Griffon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Academy Sports and Griffon.

Diversification Opportunities for Academy Sports and Griffon

0.25

Correlation Coefficient

Academy Sports  Griffon

Modest diversification

The 3 months correlation between Academy and Griffon is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Griffon 575 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon 575 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 Griffon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Griffon 575 has no effect on the direction of Academy Sports i.e., Academy Sports and Griffon go up and down completely randomly.

Pair Corralation between Academy Sports and Griffon

Considering the 90-day investment horizon Academy Sports Outdoors is expected to under-perform the Griffon. In addition to that, Academy Sports is 3.54 times more volatile than Griffon 575. It trades about -0.08 of its total potential returns per unit of risk. Griffon 575 is currently generating about -0.17 per unit of volatility. If you would invest  9,936  in Griffon 575 on September 4, 2024 and sell it today you would lose (229.00) from holding Griffon 575 or give up 2.3% of portfolio value over 90 days.

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

Academy Sports Outdoors  vs.  Griffon 575

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 very healthy basic indicators, Academy Sports is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Griffon 575

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Griffon 575 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Griffon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Academy Sports and Griffon

The main advantage of trading using opposite Academy Sports and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Academy Sports position performs unexpectedly, Griffon 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 Griffon will offset losses from the drop in Griffon's long position.

The idea behind Academy Sports Outdoors and Griffon 575 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.