Correlation Between E Home and Churchill Downs

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

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

Diversification Opportunities for E Home and Churchill Downs

0.49

Correlation Coefficient

E Home  Churchill Downs

Very weak diversification

The 3 months correlation between EJH and Churchill is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding E Home Household Service and Churchill Downs Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Churchill Downs and E Home 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 E Home Household Service are associated (or correlated) with Churchill Downs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Churchill Downs has no effect on the direction of E Home i.e., E Home and Churchill Downs go up and down completely randomly.

Pair Corralation between E Home and Churchill Downs

Considering the 90-day investment horizon E Home Household Service is expected to under-perform the Churchill Downs. In addition to that, E Home is 5.37 times more volatile than Churchill Downs Incorporated. It trades about -0.04 of its total potential returns per unit of risk. Churchill Downs Incorporated is currently generating about -0.06 per unit of volatility. If you would invest  13,510  in Churchill Downs Incorporated on October 21, 2024 and sell it today you would lose (910.00) from holding Churchill Downs Incorporated or give up 6.74% of portfolio value over 90 days.

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

E Home Household Service  vs.  Churchill Downs Incorporated

E Home Household

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Home Household Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 latest uncertain performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with E Home and Churchill Downs

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

The idea behind E Home Household Service and Churchill Downs Incorporated 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.