Correlation Between Chipotle Mexican and VARIOUS EATERIES

Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and VARIOUS EATERIES 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 VARIOUS EATERIES 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 VARIOUS EATERIES LS, you can compare the effects of market volatilities on Chipotle Mexican and VARIOUS EATERIES 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 VARIOUS EATERIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and VARIOUS EATERIES.

Diversification Opportunities for Chipotle Mexican and VARIOUS EATERIES

0.63

Correlation Coefficient

Chipotle Mexican  VARIOUS EATERIES

Poor diversification

The 3 months correlation between Chipotle and VARIOUS is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and VARIOUS EATERIES LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VARIOUS EATERIES 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 VARIOUS EATERIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VARIOUS EATERIES has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and VARIOUS EATERIES go up and down completely randomly.

Pair Corralation between Chipotle Mexican and VARIOUS EATERIES

If you would invest  5,318  in Chipotle Mexican Grill on September 3, 2024 and sell it today you would earn a total of  593.00  from holding Chipotle Mexican Grill or generate 11.15% return on investment over 90 days.

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

Chipotle Mexican Grill  vs.  VARIOUS EATERIES LS

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.

VARIOUS EATERIES

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VARIOUS EATERIES LS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, VARIOUS EATERIES 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 VARIOUS EATERIES

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

The idea behind Chipotle Mexican Grill and VARIOUS EATERIES LS 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.