Correlation Between Chipotle Mexican and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Lockheed Martin 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 Lockheed Martin 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 Lockheed Martin, you can compare the effects of market volatilities on Chipotle Mexican and Lockheed Martin 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 Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Lockheed Martin.
Diversification Opportunities for Chipotle Mexican and Lockheed Martin
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chipotle and Lockheed is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin 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 Lockheed Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lockheed Martin has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Lockheed Martin go up and down completely randomly.
Pair Corralation between Chipotle Mexican and Lockheed Martin
Assuming the 90 days trading horizon Chipotle Mexican Grill is expected to under-perform the Lockheed Martin. But the stock apears to be less risky and, when comparing its historical volatility, Chipotle Mexican Grill is 1.1 times less risky than Lockheed Martin. The stock trades about -0.2 of its potential returns per unit of risk. The Lockheed Martin is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,014,200 in Lockheed Martin on October 20, 2024 and sell it today you would earn a total of 1,000.00 from holding Lockheed Martin or generate 0.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Chipotle Mexican Grill vs. Lockheed Martin
Performance |
| Timeline |
| Chipotle Mexican Grill |
| Lockheed Martin |
Chipotle Mexican and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and Lockheed Martin
The main advantage of trading using opposite Chipotle Mexican and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Lockheed Martin 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 Lockheed Martin will offset losses from the drop in Lockheed Martin's long position.| Chipotle Mexican vs. Delta Air Lines | Chipotle Mexican vs. McEwen Mining | Chipotle Mexican vs. Verizon Communications | Chipotle Mexican vs. Grupo Industrial Saltillo |
| Lockheed Martin vs. McEwen Mining | Lockheed Martin vs. Grupo Sports World | Lockheed Martin vs. Applied Materials | Lockheed Martin vs. UnitedHealth Group Incorporated |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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