Correlation Between Amazon and Chipotle Mexican
Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and Chipotle Mexican into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Chipotle Mexican Grill, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Chipotle Mexican.
Diversification Opportunities for Amazon and Chipotle Mexican
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Amazon and Chipotle is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Amazon 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 Amazon 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 Amazon 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 Amazon i.e., Amazon and Chipotle Mexican go up and down completely randomly.
Pair Corralation between Amazon and Chipotle Mexican
Assuming the 90 days trading horizon Amazon is expected to generate 155.1 times less return on investment than Chipotle Mexican. But when comparing it to its historical volatility, Amazon Inc is 94.63 times less risky than Chipotle Mexican. It trades about 0.11 of its potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 41,020 in Chipotle Mexican Grill on September 3, 2024 and sell it today you would lose (39,200) from holding Chipotle Mexican Grill or give up 95.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.0% |
| Values | Daily Returns |
Amazon Inc vs. Chipotle Mexican Grill
Performance |
| Timeline |
| Amazon Inc |
| Chipotle Mexican Grill |
Amazon and Chipotle Mexican Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Chipotle Mexican
The main advantage of trading using opposite Amazon and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.| Amazon vs. Bank of America | Amazon vs. Lloyds Banking Group | Amazon vs. SVB Financial Group | Amazon vs. Unifique Telecomunicaes SA |
| Chipotle Mexican vs. Taiwan Semiconductor Manufacturing | Chipotle Mexican vs. Apple Inc | Chipotle Mexican vs. Alibaba Group Holding | Chipotle Mexican vs. Microsoft |
Check out your portfolio center.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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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