Correlation Between Empire Global and Churchill Downs

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

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

Diversification Opportunities for Empire Global and Churchill Downs

0.46

Correlation Coefficient

Empire Global  Churchill Downs

Very weak diversification

The 3 months correlation between Empire and Churchill is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Empire Global Gaming and Churchill Downs Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Churchill Downs and Empire Global 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 Empire Global Gaming 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 Empire Global i.e., Empire Global and Churchill Downs go up and down completely randomly.

Pair Corralation between Empire Global and Churchill Downs

Given the investment horizon of 90 days Empire Global Gaming is expected to generate 215.43 times more return on investment than Churchill Downs. However, Empire Global is 215.43 times more volatile than Churchill Downs Incorporated. It trades about 0.28 of its potential returns per unit of risk. Churchill Downs Incorporated is currently generating about -0.23 per unit of risk. If you would invest  0.00  in Empire Global Gaming on December 29, 2024 and sell it today you would earn a total of  0.01  from holding Empire Global Gaming or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	21.31%
Values	Daily Returns

Empire Global Gaming  vs.  Churchill Downs Incorporated

Empire Global Gaming

Risk-Adjusted Performance

Solid

Over the last 90 days Empire Global Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unfluctuating technical and fundamental indicators, Empire Global reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Empire Global and Churchill Downs

The main advantage of trading using opposite Empire Global and Churchill Downs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Global 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 Empire Global Gaming 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.