Correlation Between Singapore Airlines and Churchill Downs

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

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

Diversification Opportunities for Singapore Airlines and Churchill Downs

-0.17

Correlation Coefficient

Singapore Airlines  Churchill Downs

Good diversification

The 3 months correlation between Singapore and Churchill is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Airlines Limited and Churchill Downs Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Churchill Downs and Singapore Airlines 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 Singapore Airlines Limited 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 Singapore Airlines i.e., Singapore Airlines and Churchill Downs go up and down completely randomly.

Pair Corralation between Singapore Airlines and Churchill Downs

Assuming the 90 days trading horizon Singapore Airlines Limited is expected to generate 0.74 times more return on investment than Churchill Downs. However, Singapore Airlines Limited is 1.35 times less risky than Churchill Downs. It trades about 0.14 of its potential returns per unit of risk. Churchill Downs Incorporated is currently generating about -0.29 per unit of risk. If you would invest  442.00  in Singapore Airlines Limited on November 29, 2024 and sell it today you would earn a total of  31.00  from holding Singapore Airlines Limited or generate 7.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Singapore Airlines Limited  vs.  Churchill Downs Incorporated

Singapore Airlines

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Airlines Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Singapore Airlines may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Singapore Airlines and Churchill Downs

The main advantage of trading using opposite Singapore Airlines and Churchill Downs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore Airlines 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 Singapore Airlines Limited 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.