Correlation Between Chipotle Mexican and Compass Group
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Compass Group 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 Compass Group 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 Compass Group PLC, you can compare the effects of market volatilities on Chipotle Mexican and Compass Group 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 Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Compass Group.
Diversification Opportunities for Chipotle Mexican and Compass Group
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Chipotle and Compass is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Group PLC 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 Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Compass Group go up and down completely randomly.
Pair Corralation between Chipotle Mexican and Compass Group
Assuming the 90 days horizon Chipotle Mexican Grill is expected to generate 1.16 times more return on investment than Compass Group. However, Chipotle Mexican is 1.16 times more volatile than Compass Group PLC. It trades about 0.2 of its potential returns per unit of risk. Compass Group PLC is currently generating about 0.19 per unit of risk. If you would invest 5,403 in Chipotle Mexican Grill on August 31, 2024 and sell it today you would earn a total of 512.00 from holding Chipotle Mexican Grill or generate 9.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chipotle Mexican Grill vs. Compass Group PLC
Performance |
| Timeline |
| Chipotle Mexican Grill |
| Compass Group PLC |
Chipotle Mexican and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and Compass Group
The main advantage of trading using opposite Chipotle Mexican and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Compass Group 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 Compass Group will offset losses from the drop in Compass Group's long position.| Chipotle Mexican vs. McDonalds | Chipotle Mexican vs. Starbucks | Chipotle Mexican vs. Starbucks | Chipotle Mexican vs. Compass Group PLC |
| Compass Group vs. McDonalds | Compass Group vs. Starbucks | Compass Group vs. Starbucks | Compass Group vs. Yum Brands |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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