Correlation Between Cebu Air and Chipotle Mexican

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

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

Diversification Opportunities for Cebu Air and Chipotle Mexican

-0.61

Correlation Coefficient

Cebu Air  Chipotle Mexican

Excellent diversification

The 3 months correlation between Cebu and Chipotle is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR 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 Cebu Air 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 Cebu Air ADR 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 Cebu Air i.e., Cebu Air and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Cebu Air and Chipotle Mexican

If you would invest  5,927  in Chipotle Mexican Grill on September 14, 2024 and sell it today you would earn a total of  689.00  from holding Chipotle Mexican Grill or generate 11.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Cebu Air ADR  vs.  Chipotle Mexican Grill

Cebu Air ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cebu Air ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Chipotle Mexican Grill

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating primary indicators, Chipotle Mexican reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cebu Air and Chipotle Mexican

The main advantage of trading using opposite Cebu Air and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cebu Air 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 Cebu Air ADR 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.