Correlation Between Callaway Golf and Madison Square

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

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

Diversification Opportunities for Callaway Golf and Madison Square

0.87

Correlation Coefficient

Callaway Golf  Madison Square

Very poor diversification

The 3 months correlation between Callaway and Madison is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Callaway Golf and Madison Square Garden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Square Garden 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 Madison Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Square Garden has no effect on the direction of Callaway Golf i.e., Callaway Golf and Madison Square go up and down completely randomly.

Pair Corralation between Callaway Golf and Madison Square

Given the investment horizon of 90 days Callaway Golf is expected to under-perform the Madison Square. In addition to that, Callaway Golf is 1.73 times more volatile than Madison Square Garden. It trades about -0.09 of its total potential returns per unit of risk. Madison Square Garden is currently generating about -0.07 per unit of volatility. If you would invest  4,052  in Madison Square Garden on September 3, 2024 and sell it today you would lose (353.00) from holding Madison Square Garden or give up 8.71% 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.  Madison Square Garden

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.

Madison Square Garden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Madison Square Garden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Callaway Golf and Madison Square

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

The idea behind Callaway Golf and Madison Square Garden 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.