Correlation Between Chipotle Mexican and KB Home
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and KB Home 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 KB Home 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 KB Home, you can compare the effects of market volatilities on Chipotle Mexican and KB Home 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 KB Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and KB Home.
Diversification Opportunities for Chipotle Mexican and KB Home
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Chipotle and KBH is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and KB Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Home 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 KB Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB Home has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and KB Home go up and down completely randomly.
Pair Corralation between Chipotle Mexican and KB Home
Assuming the 90 days trading horizon Chipotle Mexican Grill is expected to under-perform the KB Home. In addition to that, Chipotle Mexican is 3.01 times more volatile than KB Home. It trades about -0.07 of its total potential returns per unit of risk. KB Home is currently generating about 0.12 per unit of volatility. If you would invest 104,810 in KB Home on September 12, 2024 and sell it today you would earn a total of 51,890 from holding KB Home or generate 49.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chipotle Mexican Grill vs. KB Home
Performance |
| Timeline |
| Chipotle Mexican Grill |
| KB Home |
Chipotle Mexican and KB Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and KB Home
The main advantage of trading using opposite Chipotle Mexican and KB Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, KB Home 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 KB Home will offset losses from the drop in KB Home's long position.| Chipotle Mexican vs. United States Steel | Chipotle Mexican vs. Deutsche Bank Aktiengesellschaft | Chipotle Mexican vs. First Republic Bank | Chipotle Mexican vs. Capital One Financial |
| KB Home vs. Grupo Sports World | KB Home vs. Verizon Communications | KB Home vs. Grupo Carso SAB | KB Home vs. Costco Wholesale |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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