Correlation Between South West and Callaway Golf

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

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

Diversification Opportunities for South West and Callaway Golf

0.79

Correlation Coefficient

South West  Callaway Golf

Poor diversification

The 3 months correlation between South and Callaway is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding South West Pinnacle and Callaway Golf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Callaway Golf and South West 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 South West Pinnacle are associated (or correlated) with Callaway Golf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Callaway Golf has no effect on the direction of South West i.e., South West and Callaway Golf go up and down completely randomly.

Pair Corralation between South West and Callaway Golf

If you would invest  1,892  in Callaway Golf on February 5, 2024 and sell it today you would earn a total of  0.00  from holding Callaway Golf or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	5.26%
Values	Daily Returns

South West Pinnacle  vs.  Callaway Golf

South West Pinnacle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days South West Pinnacle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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. In spite of fairly strong essential indicators, Callaway Golf is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with South West and Callaway Golf

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

The idea behind South West Pinnacle and Callaway Golf 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.