Correlation Between Light Wonder and Churchill Downs

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

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

Diversification Opportunities for Light Wonder and Churchill Downs

0.34

Correlation Coefficient

Light Wonder  Churchill Downs

Weak diversification

The 3 months correlation between Light and Churchill is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Light Wonder and Churchill Downs Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Churchill Downs and Light Wonder 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 Light Wonder 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 Light Wonder i.e., Light Wonder and Churchill Downs go up and down completely randomly.

Pair Corralation between Light Wonder and Churchill Downs

Considering the 90-day investment horizon Light Wonder is expected to under-perform the Churchill Downs. In addition to that, Light Wonder is 2.04 times more volatile than Churchill Downs Incorporated. It trades about -0.07 of its total potential returns per unit of risk. Churchill Downs Incorporated is currently generating about 0.0 per unit of volatility. If you would invest  13,983  in Churchill Downs Incorporated on September 12, 2024 and sell it today you would lose (146.00) from holding Churchill Downs Incorporated or give up 1.04% of portfolio value over 90 days.

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

Light Wonder  vs.  Churchill Downs Incorporated

Light Wonder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Light Wonder has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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.

Pair Trading with Light Wonder and Churchill Downs

The main advantage of trading using opposite Light Wonder and Churchill Downs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Light Wonder 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 Light Wonder 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.