Correlation Between Callaway Golf and Li Ning

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

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

Diversification Opportunities for Callaway Golf and Li Ning

-0.19

Correlation Coefficient

Callaway Golf  Li Ning

Good diversification

The 3 months correlation between Callaway and LNNGF is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Callaway Golf and Li Ning Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Ning Company 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 Li Ning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Ning Company has no effect on the direction of Callaway Golf i.e., Callaway Golf and Li Ning go up and down completely randomly.

Pair Corralation between Callaway Golf and Li Ning

Given the investment horizon of 90 days Callaway Golf is expected to under-perform the Li Ning. In addition to that, Callaway Golf is 1.06 times more volatile than Li Ning Company. It trades about -0.11 of its total potential returns per unit of risk. Li Ning Company is currently generating about 0.03 per unit of volatility. If you would invest  233.00  in Li Ning Company on October 20, 2024 and sell it today you would earn a total of  7.00  from holding Li Ning Company or generate 3.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Callaway Golf  vs.  Li Ning Company

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

Li Ning Company

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Li Ning Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Li Ning is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Callaway Golf and Li Ning

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

The idea behind Callaway Golf and Li Ning Company 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 .