Correlation Between Portillos and Churchill Downs

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

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

Diversification Opportunities for Portillos and Churchill Downs

-0.78

Correlation Coefficient

Portillos  Churchill Downs

Pay attention - limited upside

The 3 months correlation between Portillos and Churchill is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Portillos and Churchill Downs Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Churchill Downs and Portillos 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 Portillos 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 Portillos i.e., Portillos and Churchill Downs go up and down completely randomly.

Pair Corralation between Portillos and Churchill Downs

Given the investment horizon of 90 days Portillos is expected to under-perform the Churchill Downs. In addition to that, Portillos is 2.43 times more volatile than Churchill Downs Incorporated. It trades about -0.27 of its total potential returns per unit of risk. Churchill Downs Incorporated is currently generating about 0.28 per unit of volatility. If you would invest  12,339  in Churchill Downs Incorporated on February 24, 2024 and sell it today you would earn a total of  1,121  from holding Churchill Downs Incorporated or generate 9.09% return on investment over 90 days.

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

Portillos  vs.  Churchill Downs Incorporated

Portillos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Portillos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Churchill Downs

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Churchill Downs Incorporated are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Churchill Downs may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Portillos and Churchill Downs

The main advantage of trading using opposite Portillos and Churchill Downs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Portillos 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 Portillos 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.