Correlation Between WW International and Churchill Downs

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

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

Diversification Opportunities for WW International and Churchill Downs

-0.37

Correlation Coefficient

WW International  Churchill Downs

Very good diversification

The 3 months correlation between WW International and Churchill is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding WW International and Churchill Downs Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Churchill Downs and WW International 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 WW 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 WW International i.e., WW International and Churchill Downs go up and down completely randomly.

Pair Corralation between WW International and Churchill Downs

Allowing for the 90-day total investment horizon WW International is expected to generate 8.6 times more return on investment than Churchill Downs. However, WW International is 8.6 times more volatile than Churchill Downs Incorporated. It trades about 0.05 of its potential returns per unit of risk. Churchill Downs Incorporated is currently generating about -0.28 per unit of risk. If you would invest  144.00  in WW International on October 10, 2024 and sell it today you would earn a total of  1.00  from holding WW International or generate 0.69% return on investment over 90 days.

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

WW International  vs.  Churchill Downs Incorporated

WW International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WW International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains 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 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 WW International and Churchill Downs

The main advantage of trading using opposite WW International and Churchill Downs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WW International 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 WW 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.