Correlation Between Smart Share and Churchill Downs

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

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

Diversification Opportunities for Smart Share and Churchill Downs

-0.25

Correlation Coefficient

Smart Share  Churchill Downs

Very good diversification

The 3 months correlation between Smart and Churchill is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Smart Share Global and Churchill Downs Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Churchill Downs rporated and Smart Share 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 Smart Share Global 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 rporated has no effect on the direction of Smart Share i.e., Smart Share and Churchill Downs go up and down completely randomly.

Pair Corralation between Smart Share and Churchill Downs

Allowing for the 90-day total investment horizon Smart Share is expected to generate 6.4 times less return on investment than Churchill Downs. In addition to that, Smart Share is 2.33 times more volatile than Churchill Downs Incorporated. It trades about 0.01 of its total potential returns per unit of risk. Churchill Downs Incorporated is currently generating about 0.12 per unit of volatility. If you would invest  12,391  in Churchill Downs Incorporated on January 30, 2024 and sell it today you would earn a total of  623.00  from holding Churchill Downs Incorporated or generate 5.03% return on investment over 90 days.

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

Smart Share Global  vs.  Churchill Downs Incorporated

Smart Share Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Smart Share displayed solid returns over the last few months and may actually be approaching a breakup point.

Churchill Downs rporated

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. In spite of very healthy fundamental indicators, Churchill Downs is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Smart Share and Churchill Downs

The main advantage of trading using opposite Smart Share and Churchill Downs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smart Share 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 Smart Share Global 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.