Correlation Between Callaway Golf and Focusrite Plc

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

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

Diversification Opportunities for Callaway Golf and Focusrite Plc

0.38

Correlation Coefficient

Callaway Golf  Focusrite Plc

Weak diversification

The 3 months correlation between Callaway and Focusrite is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Callaway Golf and Focusrite plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focusrite plc and Callaway Golf 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 Callaway Golf are associated (or correlated) with Focusrite Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focusrite plc has no effect on the direction of Callaway Golf i.e., Callaway Golf and Focusrite Plc go up and down completely randomly.

Pair Corralation between Callaway Golf and Focusrite Plc

Given the investment horizon of 90 days Callaway Golf is expected to under-perform the Focusrite Plc. In addition to that, Callaway Golf is 1.77 times more volatile than Focusrite plc. It trades about -0.15 of its total potential returns per unit of risk. Focusrite plc is currently generating about -0.08 per unit of volatility. If you would invest  454.00  in Focusrite plc on September 28, 2024 and sell it today you would lose (87.00) from holding Focusrite plc or give up 19.16% of portfolio value over 90 days.

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

Callaway Golf  vs.  Focusrite plc

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Focusrite plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Focusrite plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Focusrite Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Callaway Golf and Focusrite Plc

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

The idea behind Callaway Golf and Focusrite plc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.