Correlation Between Smart Share and Chipotle Mexican

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

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

Diversification Opportunities for Smart Share and Chipotle Mexican

0.41

Correlation Coefficient

Smart Share  Chipotle Mexican

Very weak diversification

The 3 months correlation between Smart and Chipotle is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Smart Share Global 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 Smart Share 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 Smart Share Global 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 Smart Share i.e., Smart Share and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Smart Share and Chipotle Mexican

Allowing for the 90-day total investment horizon Smart Share is expected to generate 4.02 times less return on investment than Chipotle Mexican. In addition to that, Smart Share is 1.67 times more volatile than Chipotle Mexican Grill. It trades about 0.04 of its total potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.26 per unit of volatility. If you would invest  5,638  in Chipotle Mexican Grill on September 5, 2024 and sell it today you would earn a total of  456.00  from holding Chipotle Mexican Grill or generate 8.09% return on investment over 90 days.

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

Smart Share Global  vs.  Chipotle Mexican Grill

Smart Share Global

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Smart Share displayed solid returns over the last few months and may actually be approaching a breakup point.

Chipotle Mexican Grill

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 10 (%) 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.

Pair Trading with Smart Share and Chipotle Mexican

The main advantage of trading using opposite Smart Share and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smart Share 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 Smart Share Global 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.