Correlation Between Churchill Downs and Wingstop

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

Diversification Opportunities for Churchill Downs and Wingstop

0.82

Correlation Coefficient

Churchill Downs  Wingstop

Very poor diversification

The 3 months correlation between Churchill and Wingstop is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Churchill Downs Incorporated and Wingstop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wingstop 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 Wingstop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wingstop has no effect on the direction of Churchill Downs i.e., Churchill Downs and Wingstop go up and down completely randomly.

Pair Corralation between Churchill Downs and Wingstop

Given the investment horizon of 90 days Churchill Downs Incorporated is expected to generate 0.41 times more return on investment than Wingstop. However, Churchill Downs Incorporated is 2.44 times less risky than Wingstop. It trades about -0.23 of its potential returns per unit of risk. Wingstop is currently generating about -0.11 per unit of risk. If you would invest  13,416  in Churchill Downs Incorporated on December 30, 2024 and sell it today you would lose (2,293) from holding Churchill Downs Incorporated or give up 17.09% of portfolio value over 90 days.

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

Churchill Downs Incorporated  vs.  Wingstop

Churchill Downs

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Wingstop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wingstop has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Churchill Downs and Wingstop

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

The idea behind Churchill Downs Incorporated and Wingstop 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.