Correlation Between Churchill Downs and DraftKings

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

By analyzing existing cross correlation between Churchill Downs Incorporated and DraftKings, you can compare the effects of market volatilities on Churchill Downs and DraftKings 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 Churchill Downs with a short position of DraftKings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Churchill Downs and DraftKings.

Diversification Opportunities for Churchill Downs and DraftKings

0.18

Correlation Coefficient

Churchill Downs  DraftKings

Average diversification

The 3 months correlation between Churchill and DraftKings is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Churchill Downs Incorporated and DraftKings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DraftKings and Churchill Downs 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 Churchill Downs Incorporated are associated (or correlated) with DraftKings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DraftKings has no effect on the direction of Churchill Downs i.e., Churchill Downs and DraftKings go up and down completely randomly.

Pair Corralation between Churchill Downs and DraftKings

Given the investment horizon of 90 days Churchill Downs Incorporated is expected to under-perform the DraftKings. But the stock apears to be less risky and, when comparing its historical volatility, Churchill Downs Incorporated is 1.69 times less risky than DraftKings. The stock trades about -0.22 of its potential returns per unit of risk. The DraftKings is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  4,235  in DraftKings on September 19, 2024 and sell it today you would lose (163.00) from holding DraftKings or give up 3.85% of portfolio value over 90 days.

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

Churchill Downs Incorporated  vs.  DraftKings

Churchill Downs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Churchill Downs Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Churchill Downs is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

DraftKings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DraftKings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DraftKings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Churchill Downs and DraftKings

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

The idea behind Churchill Downs Incorporated and DraftKings 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.