Correlation Between Churchill Downs and Lion One

Can any of the company-specific risk be diversified away by investing in both Churchill Downs and Lion One 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 Lion One 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 Lion One Metals, you can compare the effects of market volatilities on Churchill Downs and Lion One 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 Lion One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Churchill Downs and Lion One.

Diversification Opportunities for Churchill Downs and Lion One

-0.31

Correlation Coefficient

Churchill Downs  Lion One

Very good diversification

The 3 months correlation between Churchill and Lion is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Churchill Downs Incorporated and Lion One Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion One Metals 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 Lion One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion One Metals has no effect on the direction of Churchill Downs i.e., Churchill Downs and Lion One go up and down completely randomly.

Pair Corralation between Churchill Downs and Lion One

Assuming the 90 days horizon Churchill Downs is expected to generate 1.07 times less return on investment than Lion One. But when comparing it to its historical volatility, Churchill Downs Incorporated is 2.56 times less risky than Lion One. It trades about 0.06 of its potential returns per unit of risk. Lion One Metals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Lion One Metals on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Lion One Metals or generate 0.0% return on investment over 90 days.

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

Churchill Downs Incorporated  vs.  Lion One Metals

Churchill Downs

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Churchill Downs Incorporated are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Churchill Downs is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Lion One Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lion One Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lion One may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Churchill Downs and Lion One

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

The idea behind Churchill Downs Incorporated and Lion One Metals 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.