Correlation Between GM and Callaway Golf

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

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

Diversification Opportunities for GM and Callaway Golf

0.74

Correlation Coefficient

GM  Callaway Golf

Poor diversification

The 3 months correlation between GM and Callaway is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Callaway Golf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Callaway Golf and GM 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 General Motors 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 GM i.e., GM and Callaway Golf go up and down completely randomly.

Pair Corralation between GM and Callaway Golf

Allowing for the 90-day total investment horizon GM is expected to generate 1.66 times less return on investment than Callaway Golf. But when comparing it to its historical volatility, General Motors is 2.1 times less risky than Callaway Golf. It trades about 0.12 of its potential returns per unit of risk. Callaway Golf is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  697.00  in Callaway Golf on May 7, 2025 and sell it today you would earn a total of  161.00  from holding Callaway Golf or generate 23.1% return on investment over 90 days.

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

General Motors  vs.  Callaway Golf

General Motors

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Callaway Golf

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Callaway Golf are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Callaway Golf reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Callaway Golf

The main advantage of trading using opposite GM and Callaway Golf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.