Correlation Between Chipotle Mexican and Petrleo Brasileiro
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Petrleo Brasileiro 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 Petrleo Brasileiro 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 Petrleo Brasileiro SA, you can compare the effects of market volatilities on Chipotle Mexican and Petrleo Brasileiro 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 Petrleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Petrleo Brasileiro.
Diversification Opportunities for Chipotle Mexican and Petrleo Brasileiro
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chipotle and Petrleo is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Petrleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrleo Brasileiro 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 Petrleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrleo Brasileiro has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Petrleo Brasileiro go up and down completely randomly.
Pair Corralation between Chipotle Mexican and Petrleo Brasileiro
Assuming the 90 days trading horizon Chipotle Mexican is expected to generate 2.72 times less return on investment than Petrleo Brasileiro. In addition to that, Chipotle Mexican is 1.69 times more volatile than Petrleo Brasileiro SA. It trades about 0.07 of its total potential returns per unit of risk. Petrleo Brasileiro SA is currently generating about 0.31 per unit of volatility. If you would invest 27,400 in Petrleo Brasileiro SA on August 27, 2024 and sell it today you would earn a total of 3,245 from holding Petrleo Brasileiro SA or generate 11.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chipotle Mexican Grill vs. Petrleo Brasileiro SA
Performance |
| Timeline |
| Chipotle Mexican Grill |
| Petrleo Brasileiro |
Chipotle Mexican and Petrleo Brasileiro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and Petrleo Brasileiro
The main advantage of trading using opposite Chipotle Mexican and Petrleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Petrleo Brasileiro 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 Petrleo Brasileiro will offset losses from the drop in Petrleo Brasileiro's long position.| Chipotle Mexican vs. Verizon Communications | Chipotle Mexican vs. United States Steel | Chipotle Mexican vs. Micron Technology | Chipotle Mexican vs. Applied Materials |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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