Correlation Between BT Brands and Churchill Downs

Can any of the company-specific risk be diversified away by investing in both BT 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 BT 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 BT Brands Warrant and Churchill Downs Incorporated, you can compare the effects of market volatilities on BT 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 BT Brands with a short position of Churchill Downs. Check out your portfolio center. Please also check ongoing floating volatility patterns of BT Brands and Churchill Downs.

Diversification Opportunities for BT Brands and Churchill Downs

-0.36

Correlation Coefficient

BT Brands  Churchill Downs

Very good diversification

The 3 months correlation between BTBDW and Churchill is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding BT Brands Warrant and Churchill Downs Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Churchill Downs and BT 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 BT Brands Warrant 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 BT Brands i.e., BT Brands and Churchill Downs go up and down completely randomly.

Pair Corralation between BT Brands and Churchill Downs

Assuming the 90 days horizon BT Brands Warrant is expected to generate 12.89 times more return on investment than Churchill Downs. However, BT Brands is 12.89 times more volatile than Churchill Downs Incorporated. It trades about 0.12 of its potential returns per unit of risk. Churchill Downs Incorporated is currently generating about -0.01 per unit of risk. If you would invest  8.96  in BT Brands Warrant on September 14, 2024 and sell it today you would earn a total of  0.43  from holding BT Brands Warrant or generate 4.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	22.22%
Values	Daily Returns

BT Brands Warrant  vs.  Churchill Downs Incorporated

BT Brands Warrant

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days BT Brands Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unfluctuating fundamental indicators, BT Brands showed solid returns over the last few months and may actually be approaching a breakup point.

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 recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BT Brands and Churchill Downs

The main advantage of trading using opposite BT Brands and Churchill Downs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BT 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 BT Brands Warrant 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.