Correlation Between Chipotle Mexican and Texas Roadhouse
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Texas Roadhouse 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 Texas Roadhouse 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 Texas Roadhouse, you can compare the effects of market volatilities on Chipotle Mexican and Texas Roadhouse 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 Texas Roadhouse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Texas Roadhouse.
Diversification Opportunities for Chipotle Mexican and Texas Roadhouse
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chipotle and Texas is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse 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 Texas Roadhouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Roadhouse has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Texas Roadhouse go up and down completely randomly.
Pair Corralation between Chipotle Mexican and Texas Roadhouse
Assuming the 90 days horizon Chipotle Mexican Grill is expected to under-perform the Texas Roadhouse. But the stock apears to be less risky and, when comparing its historical volatility, Chipotle Mexican Grill is 1.16 times less risky than Texas Roadhouse. The stock trades about -0.02 of its potential returns per unit of risk. The Texas Roadhouse is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 17,390 in Texas Roadhouse on November 5, 2024 and sell it today you would earn a total of 255.00 from holding Texas Roadhouse or generate 1.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chipotle Mexican Grill vs. Texas Roadhouse
Performance |
| Timeline |
| Chipotle Mexican Grill |
| Texas Roadhouse |
Chipotle Mexican and Texas Roadhouse Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and Texas Roadhouse
The main advantage of trading using opposite Chipotle Mexican and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Texas Roadhouse 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 Texas Roadhouse will offset losses from the drop in Texas Roadhouse's long position.| Chipotle Mexican vs. Harmony Gold Mining | Chipotle Mexican vs. MAG SILVER | Chipotle Mexican vs. Tsingtao Brewery | Chipotle Mexican vs. China Resources Beer |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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