Correlation Between Chipotle Mexican and Bayerische Motoren
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Bayerische Motoren 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 Bayerische Motoren 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 Bayerische Motoren Werke, you can compare the effects of market volatilities on Chipotle Mexican and Bayerische Motoren 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 Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Bayerische Motoren.
Diversification Opportunities for Chipotle Mexican and Bayerische Motoren
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Chipotle and Bayerische is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke 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 Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Bayerische Motoren go up and down completely randomly.
Pair Corralation between Chipotle Mexican and Bayerische Motoren
Assuming the 90 days trading horizon Chipotle Mexican Grill is expected to under-perform the Bayerische Motoren. In addition to that, Chipotle Mexican is 4.84 times more volatile than Bayerische Motoren Werke. It trades about -0.02 of its total potential returns per unit of risk. Bayerische Motoren Werke is currently generating about -0.01 per unit of volatility. If you would invest 171,045 in Bayerische Motoren Werke on September 14, 2024 and sell it today you would lose (9,623) from holding Bayerische Motoren Werke or give up 5.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chipotle Mexican Grill vs. Bayerische Motoren Werke
Performance |
| Timeline |
| Chipotle Mexican Grill |
| Bayerische Motoren Werke |
Chipotle Mexican and Bayerische Motoren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and Bayerische Motoren
The main advantage of trading using opposite Chipotle Mexican and Bayerische Motoren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Bayerische Motoren 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 Bayerische Motoren will offset losses from the drop in Bayerische Motoren's long position.The idea behind Chipotle Mexican Grill and Bayerische Motoren Werke 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.| Bayerische Motoren vs. Verizon Communications | Bayerische Motoren vs. United Airlines Holdings | Bayerische Motoren vs. First Republic Bank | Bayerische Motoren vs. McEwen Mining |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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