Correlation Between BANK HANDLOWY and Chipotle Mexican

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

By analyzing existing cross correlation between BANK HANDLOWY and Chipotle Mexican Grill, you can compare the effects of market volatilities on BANK HANDLOWY and Chipotle Mexican 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 BANK HANDLOWY with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK HANDLOWY and Chipotle Mexican.

Diversification Opportunities for BANK HANDLOWY and Chipotle Mexican

-0.83

Correlation Coefficient

BANK HANDLOWY  Chipotle Mexican

Pay attention - limited upside

The 3 months correlation between BANK and Chipotle is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding BANK HANDLOWY and Chipotle Mexican Grill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chipotle Mexican Grill and BANK HANDLOWY 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 BANK HANDLOWY are associated (or correlated) with Chipotle Mexican. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chipotle Mexican Grill has no effect on the direction of BANK HANDLOWY i.e., BANK HANDLOWY and Chipotle Mexican go up and down completely randomly.

Pair Corralation between BANK HANDLOWY and Chipotle Mexican

Assuming the 90 days trading horizon BANK HANDLOWY is expected to under-perform the Chipotle Mexican. But the stock apears to be less risky and, when comparing its historical volatility, BANK HANDLOWY is 2.34 times less risky than Chipotle Mexican. The stock trades about -0.2 of its potential returns per unit of risk. The Chipotle Mexican Grill is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,925  in Chipotle Mexican Grill on September 3, 2024 and sell it today you would earn a total of  986.00  from holding Chipotle Mexican Grill or generate 20.02% return on investment over 90 days.

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

BANK HANDLOWY  vs.  Chipotle Mexican Grill

BANK HANDLOWY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK HANDLOWY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Chipotle Mexican Grill

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Chipotle Mexican reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK HANDLOWY and Chipotle Mexican

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

The idea behind BANK HANDLOWY and Chipotle Mexican Grill 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.