Correlation Between Johnson Outdoors and Callaway Golf

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

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

Diversification Opportunities for Johnson Outdoors and Callaway Golf

0.6

Correlation Coefficient

Johnson Outdoors  Callaway Golf

Poor diversification

The 3 months correlation between Johnson and Callaway is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Outdoors and Callaway Golf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Callaway Golf and Johnson Outdoors 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 Johnson Outdoors are associated (or correlated) with Callaway Golf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Callaway Golf has no effect on the direction of Johnson Outdoors i.e., Johnson Outdoors and Callaway Golf go up and down completely randomly.

Pair Corralation between Johnson Outdoors and Callaway Golf

Given the investment horizon of 90 days Johnson Outdoors is expected to generate 0.56 times more return on investment than Callaway Golf. However, Johnson Outdoors is 1.8 times less risky than Callaway Golf. It trades about -0.05 of its potential returns per unit of risk. Callaway Golf is currently generating about -0.08 per unit of risk. If you would invest  3,560  in Johnson Outdoors on August 30, 2024 and sell it today you would lose (231.00) from holding Johnson Outdoors or give up 6.49% of portfolio value over 90 days.

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

Johnson Outdoors  vs.  Callaway Golf

Johnson Outdoors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Outdoors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Johnson Outdoors is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Callaway Golf

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Callaway Golf has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Johnson Outdoors and Callaway Golf

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

The idea behind Johnson Outdoors and Callaway Golf 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.