Correlation Between Callaway Golf and Shimano

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

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

Diversification Opportunities for Callaway Golf and Shimano

0.81

Correlation Coefficient

Callaway Golf  Shimano

Very poor diversification

The 3 months correlation between Callaway and Shimano is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Callaway Golf and Shimano Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimano Inc ADR 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 Shimano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimano Inc ADR has no effect on the direction of Callaway Golf i.e., Callaway Golf and Shimano go up and down completely randomly.

Pair Corralation between Callaway Golf and Shimano

Given the investment horizon of 90 days Callaway Golf is expected to generate 1.62 times more return on investment than Shimano. However, Callaway Golf is 1.62 times more volatile than Shimano Inc ADR. It trades about -0.13 of its potential returns per unit of risk. Shimano Inc ADR is currently generating about -0.24 per unit of risk. If you would invest  1,040  in Callaway Golf on September 14, 2024 and sell it today you would lose (239.00) from holding Callaway Golf or give up 22.98% 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.  Shimano Inc ADR

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.

Shimano Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shimano Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Callaway Golf and Shimano

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

The idea behind Callaway Golf and Shimano Inc ADR 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.