Correlation Between Winmark and Academy Sports

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

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

Diversification Opportunities for Winmark and Academy Sports

-0.04

Correlation Coefficient

Winmark  Academy Sports

Good diversification

The 3 months correlation between Winmark and Academy is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Winmark and Academy Sports OutdoorsInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Academy Sports Outdo and Winmark 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 Winmark 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 Outdo has no effect on the direction of Winmark i.e., Winmark and Academy Sports go up and down completely randomly.

Pair Corralation between Winmark and Academy Sports

Given the investment horizon of 90 days Winmark is expected to generate 0.67 times more return on investment than Academy Sports. However, Winmark is 1.48 times less risky than Academy Sports. It trades about -0.13 of its potential returns per unit of risk. Academy Sports OutdoorsInc is currently generating about -0.18 per unit of risk. If you would invest  37,724  in Winmark on February 21, 2024 and sell it today you would lose (1,269) from holding Winmark or give up 3.36% of portfolio value over 90 days.

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

Winmark  vs.  Academy Sports OutdoorsInc

Winmark

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Winmark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Academy Sports Outdo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Academy Sports OutdoorsInc 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 June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Winmark and Academy Sports

The main advantage of trading using opposite Winmark and Academy Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Winmark 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 Winmark and Academy Sports OutdoorsInc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.