Correlation Between Callaway Golf and Tapestry

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

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

Diversification Opportunities for Callaway Golf and Tapestry

-0.9

Correlation Coefficient

Callaway Golf  Tapestry

Pay attention - limited upside

The 3 months correlation between Callaway and Tapestry is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Callaway Golf and Tapestry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tapestry 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 Tapestry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tapestry has no effect on the direction of Callaway Golf i.e., Callaway Golf and Tapestry go up and down completely randomly.

Pair Corralation between Callaway Golf and Tapestry

Given the investment horizon of 90 days Callaway Golf is expected to under-perform the Tapestry. In addition to that, Callaway Golf is 1.59 times more volatile than Tapestry. It trades about -0.02 of its total potential returns per unit of risk. Tapestry is currently generating about 0.28 per unit of volatility. If you would invest  5,193  in Tapestry on October 9, 2024 and sell it today you would earn a total of  1,573  from holding Tapestry or generate 30.29% return on investment over 90 days.

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

Callaway Golf  vs.  Tapestry

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 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.

Tapestry

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Tapestry reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Callaway Golf and Tapestry

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

The idea behind Callaway Golf and Tapestry 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.