Correlation Between Churchill Downs and Wendys

Can any of the company-specific risk be diversified away by investing in both Churchill Downs and Wendys 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 Wendys 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 The Wendys Co, you can compare the effects of market volatilities on Churchill Downs and Wendys 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 Wendys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Churchill Downs and Wendys.

Diversification Opportunities for Churchill Downs and Wendys

0.39

Correlation Coefficient

Churchill Downs  Wendys

Weak diversification

The 3 months correlation between Churchill and Wendys is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Churchill Downs Incorporated and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys 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 Wendys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Wendys has no effect on the direction of Churchill Downs i.e., Churchill Downs and Wendys go up and down completely randomly.

Pair Corralation between Churchill Downs and Wendys

Given the investment horizon of 90 days Churchill Downs is expected to generate 2.32 times less return on investment than Wendys. But when comparing it to its historical volatility, Churchill Downs Incorporated is 1.23 times less risky than Wendys. It trades about 0.05 of its potential returns per unit of risk. The Wendys Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,648  in The Wendys Co on September 3, 2024 and sell it today you would earn a total of  188.00  from holding The Wendys Co or generate 11.41% return on investment over 90 days.

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

Churchill Downs Incorporated  vs.  The Wendys Co

Churchill Downs

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Churchill Downs Incorporated are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

The Wendys

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Wendys Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Wendys may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Churchill Downs and Wendys

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

The idea behind Churchill Downs Incorporated and The Wendys Co 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 Transaction History module to view history of all your transactions and understand their impact on performance.