Correlation Between Churchill Downs and Evolution

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

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

Diversification Opportunities for Churchill Downs and Evolution

-0.32

Correlation Coefficient

Churchill Downs  Evolution

Very good diversification

The 3 months correlation between Churchill and Evolution is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Churchill Downs Incorporated and Evolution AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution AB and Churchill Downs 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 Churchill Downs Incorporated are associated (or correlated) with Evolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution AB has no effect on the direction of Churchill Downs i.e., Churchill Downs and Evolution go up and down completely randomly.

Pair Corralation between Churchill Downs and Evolution

Given the investment horizon of 90 days Churchill Downs Incorporated is expected to generate 1.41 times more return on investment than Evolution. However, Churchill Downs is 1.41 times more volatile than Evolution AB. It trades about 0.09 of its potential returns per unit of risk. Evolution AB is currently generating about -0.29 per unit of risk. If you would invest  13,726  in Churchill Downs Incorporated on September 5, 2024 and sell it today you would earn a total of  500.00  from holding Churchill Downs Incorporated or generate 3.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Churchill Downs Incorporated  vs.  Evolution AB

Churchill Downs

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Churchill Downs Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Evolution AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Churchill Downs and Evolution

The main advantage of trading using opposite Churchill Downs and Evolution positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Churchill Downs position performs unexpectedly, Evolution 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 Evolution will offset losses from the drop in Evolution's long position.

The idea behind Churchill Downs Incorporated and Evolution AB 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.