Correlation Between Restaurant Brands and Churchill Downs

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

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

Diversification Opportunities for Restaurant Brands and Churchill Downs

-0.65

Correlation Coefficient

Restaurant Brands  Churchill Downs

Excellent diversification

The 3 months correlation between Restaurant and Churchill is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa and Churchill Downs Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Churchill Downs and Restaurant Brands 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 Restaurant Brands International 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 Restaurant Brands i.e., Restaurant Brands and Churchill Downs go up and down completely randomly.

Pair Corralation between Restaurant Brands and Churchill Downs

Considering the 90-day investment horizon Restaurant Brands International is expected to generate 1.21 times more return on investment than Churchill Downs. However, Restaurant Brands is 1.21 times more volatile than Churchill Downs Incorporated. It trades about 0.01 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  6,459  in Restaurant Brands International on December 31, 2024 and sell it today you would lose (7.00) from holding Restaurant Brands International or give up 0.11% of portfolio value over 90 days.

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

Restaurant Brands Internationa  vs.  Churchill Downs Incorporated

Restaurant Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Restaurant Brands International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Restaurant Brands is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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 May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Restaurant Brands and Churchill Downs

The main advantage of trading using opposite Restaurant Brands and Churchill Downs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant Brands 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 Restaurant Brands International 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.