Correlation Between Li Ning and Callaway Golf

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

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

Diversification Opportunities for Li Ning and Callaway Golf

0.03

Correlation Coefficient

Li Ning  Callaway Golf

Significant diversification

The 3 months correlation between LNNGY and Callaway is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Li Ning Co and Callaway Golf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Callaway Golf and Li Ning 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 Li Ning Co 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 Li Ning i.e., Li Ning and Callaway Golf go up and down completely randomly.

Pair Corralation between Li Ning and Callaway Golf

Assuming the 90 days horizon Li Ning Co is expected to generate 1.53 times more return on investment than Callaway Golf. However, Li Ning is 1.53 times more volatile than Callaway Golf. It trades about 0.07 of its potential returns per unit of risk. Callaway Golf is currently generating about -0.09 per unit of risk. If you would invest  4,538  in Li Ning Co on September 2, 2024 and sell it today you would earn a total of  721.00  from holding Li Ning Co or generate 15.89% return on investment over 90 days.

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

Li Ning Co  vs.  Callaway Golf

Li Ning

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Li Ning Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Li Ning showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Li Ning and Callaway Golf

The main advantage of trading using opposite Li Ning and Callaway Golf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Ning 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 Li Ning Co 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.