Correlation Between Chipotle Mexican and MUSCLE MAKER

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

By analyzing existing cross correlation between Chipotle Mexican Grill and MUSCLE MAKER DL 0001, you can compare the effects of market volatilities on Chipotle Mexican and MUSCLE MAKER 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 Chipotle Mexican with a short position of MUSCLE MAKER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and MUSCLE MAKER.

Diversification Opportunities for Chipotle Mexican and MUSCLE MAKER

-0.58

Correlation Coefficient

Chipotle Mexican  MUSCLE MAKER

Excellent diversification

The 3 months correlation between Chipotle and MUSCLE is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and MUSCLE MAKER DL 0001 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MUSCLE MAKER DL and Chipotle Mexican 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 Chipotle Mexican Grill are associated (or correlated) with MUSCLE MAKER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MUSCLE MAKER DL has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and MUSCLE MAKER go up and down completely randomly.

Pair Corralation between Chipotle Mexican and MUSCLE MAKER

Assuming the 90 days horizon Chipotle Mexican Grill is expected to generate 0.56 times more return on investment than MUSCLE MAKER. However, Chipotle Mexican Grill is 1.78 times less risky than MUSCLE MAKER. It trades about 0.15 of its potential returns per unit of risk. MUSCLE MAKER DL 0001 is currently generating about -0.02 per unit of risk. If you would invest  5,107  in Chipotle Mexican Grill on September 23, 2024 and sell it today you would earn a total of  893.00  from holding Chipotle Mexican Grill or generate 17.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.97%
Values	Daily Returns

Chipotle Mexican Grill  vs.  MUSCLE MAKER DL 0001

Chipotle Mexican Grill

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chipotle Mexican reported solid returns over the last few months and may actually be approaching a breakup point.

MUSCLE MAKER DL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MUSCLE MAKER DL 0001 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MUSCLE MAKER is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chipotle Mexican and MUSCLE MAKER

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

The idea behind Chipotle Mexican Grill and MUSCLE MAKER DL 0001 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.