Correlation Between Callaway Golf and Johnson Outdoors

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

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

Diversification Opportunities for Callaway Golf and Johnson Outdoors

0.86

Correlation Coefficient

Callaway Golf  Johnson Outdoors

Very poor diversification

The 3 months correlation between Callaway and Johnson is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Callaway Golf and Johnson Outdoors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Outdoors 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 Johnson Outdoors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Outdoors has no effect on the direction of Callaway Golf i.e., Callaway Golf and Johnson Outdoors go up and down completely randomly.

Pair Corralation between Callaway Golf and Johnson Outdoors

Given the investment horizon of 90 days Callaway Golf is expected to generate 1.57 times more return on investment than Johnson Outdoors. However, Callaway Golf is 1.57 times more volatile than Johnson Outdoors. It trades about -0.05 of its potential returns per unit of risk. Johnson Outdoors is currently generating about -0.18 per unit of risk. If you would invest  767.00  in Callaway Golf on December 30, 2024 and sell it today you would lose (114.00) from holding Callaway Golf or give up 14.86% of portfolio value over 90 days.

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

Callaway Golf  vs.  Johnson Outdoors

Callaway Golf

Risk-Adjusted Performance

Very Weak

Over the last 90 days Callaway Golf has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Johnson Outdoors

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Callaway Golf and Johnson Outdoors

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

The idea behind Callaway Golf and Johnson 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .