Correlation Between Chipotle Mexican and Valero Energy
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Valero Energy 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 Valero Energy 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 Valero Energy, you can compare the effects of market volatilities on Chipotle Mexican and Valero Energy 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 Valero Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Valero Energy.
Diversification Opportunities for Chipotle Mexican and Valero Energy
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Chipotle and Valero is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy 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 Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Valero Energy go up and down completely randomly.
Pair Corralation between Chipotle Mexican and Valero Energy
Assuming the 90 days trading horizon Chipotle Mexican Grill is expected to under-perform the Valero Energy. In addition to that, Chipotle Mexican is 1.81 times more volatile than Valero Energy. It trades about -0.2 of its total potential returns per unit of risk. Valero Energy is currently generating about 0.12 per unit of volatility. If you would invest 242,017 in Valero Energy on October 20, 2024 and sell it today you would earn a total of 4,884 from holding Valero Energy or generate 2.02% 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. Valero Energy
Performance |
| Timeline |
| Chipotle Mexican Grill |
| Valero Energy |
Chipotle Mexican and Valero Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and Valero Energy
The main advantage of trading using opposite Chipotle Mexican and Valero Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Valero Energy 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 Valero Energy will offset losses from the drop in Valero Energy'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 |
| Valero Energy vs. Southwest Airlines | Valero Energy vs. Verizon Communications | Valero Energy vs. First Majestic Silver | Valero Energy 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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