Correlation Between Chipotle Mexican and Air Lease

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

Diversification Opportunities for Chipotle Mexican and Air Lease

0.77

Correlation Coefficient

Chipotle Mexican  Air Lease

Poor diversification

The 3 months correlation between Chipotle and Air is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Air Lease go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Air Lease

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 0.98 times more return on investment than Air Lease. However, Chipotle Mexican Grill is 1.02 times less risky than Air Lease. It trades about 0.11 of its potential returns per unit of risk. Air Lease is currently generating about 0.05 per unit of risk. If you would invest  2,825  in Chipotle Mexican Grill on September 13, 2024 and sell it today you would earn a total of  3,732  from holding Chipotle Mexican Grill or generate 132.11% 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.  Air Lease

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 weak primary indicators, Chipotle Mexican reported solid returns over the last few months and may actually be approaching a breakup point.

Air Lease

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Air Lease disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chipotle Mexican and Air Lease

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

The idea behind Chipotle Mexican Grill and Air Lease 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.