Correlation Between Chewy and Chipotle Mexican

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

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

Diversification Opportunities for Chewy and Chipotle Mexican

0.53

Correlation Coefficient

Chewy  Chipotle Mexican

Very weak diversification

The 3 months correlation between Chewy and Chipotle is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Chewy Inc 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 Chewy 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 Chewy Inc 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 Chewy i.e., Chewy and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Chewy and Chipotle Mexican

Given the investment horizon of 90 days Chewy Inc is expected to under-perform the Chipotle Mexican. In addition to that, Chewy is 1.51 times more volatile than Chipotle Mexican Grill. It trades about -0.05 of its total potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.0 per unit of volatility. If you would invest  6,201  in Chipotle Mexican Grill on September 23, 2024 and sell it today you would lose (14.00) from holding Chipotle Mexican Grill or give up 0.23% of portfolio value over 90 days.

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

Chewy Inc  vs.  Chipotle Mexican Grill

Chewy Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chewy Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Chewy showed solid returns over the last few months and may actually be approaching a breakup point.

Chipotle Mexican Grill

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating primary indicators, Chipotle Mexican may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chewy and Chipotle Mexican

The main advantage of trading using opposite Chewy and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chewy 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 Chewy Inc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.