Correlation Between Chipotle Mexican and Kimberly Clark

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

Diversification Opportunities for Chipotle Mexican and Kimberly Clark

-0.79

Correlation Coefficient

Chipotle Mexican  Kimberly Clark

Pay attention - limited upside

The 3 months correlation between Chipotle and Kimberly is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Kimberly Clark de Mxico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark de 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 Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark de has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Kimberly Clark go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Kimberly Clark

Assuming the 90 days trading horizon Chipotle Mexican Grill is expected to generate 1.72 times more return on investment than Kimberly Clark. However, Chipotle Mexican is 1.72 times more volatile than Kimberly Clark de Mxico. It trades about 0.12 of its potential returns per unit of risk. Kimberly Clark de Mxico is currently generating about -0.09 per unit of risk. If you would invest  112,105  in Chipotle Mexican Grill on September 17, 2024 and sell it today you would earn a total of  17,895  from holding Chipotle Mexican Grill or generate 15.96% return on investment over 90 days.

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

Chipotle Mexican Grill  vs.  Kimberly Clark de Mxico

Chipotle Mexican Grill

Risk-Adjusted Performance

9 of 100

OK

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. In spite of fairly unfluctuating technical and fundamental indicators, Chipotle Mexican showed solid returns over the last few months and may actually be approaching a breakup point.

Kimberly Clark de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kimberly Clark de Mxico has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Chipotle Mexican and Kimberly Clark

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

The idea behind Chipotle Mexican Grill and Kimberly Clark de Mxico 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.