Correlation Between Nike and Churchill Downs
Can any of the company-specific risk be diversified away by investing in both Nike 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 Nike and Churchill Downs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Churchill Downs Incorporated, you can compare the effects of market volatilities on Nike 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 Nike with a short position of Churchill Downs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Churchill Downs.
Diversification Opportunities for Nike and Churchill Downs
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nike and Churchill is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Churchill Downs Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Churchill Downs and Nike 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 Nike Inc 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 Nike i.e., Nike and Churchill Downs go up and down completely randomly.
Pair Corralation between Nike and Churchill Downs
Considering the 90-day investment horizon Nike Inc is expected to generate 2.27 times more return on investment than Churchill Downs. However, Nike is 2.27 times more volatile than Churchill Downs Incorporated. It trades about 0.14 of its potential returns per unit of risk. Churchill Downs Incorporated is currently generating about -0.34 per unit of risk. If you would invest 7,558 in Nike Inc on November 28, 2024 and sell it today you would earn a total of 559.00 from holding Nike Inc or generate 7.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nike Inc vs. Churchill Downs Incorporated
Performance |
| Timeline |
| Nike Inc |
| Churchill Downs |
Nike and Churchill Downs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Churchill Downs
The main advantage of trading using opposite Nike and Churchill Downs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike 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 Nike Inc 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.| Churchill Downs vs. Accel Entertainment | Churchill Downs vs. PlayAGS | Churchill Downs vs. International Game Technology | Churchill Downs vs. Everi Holdings |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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