Correlation Between Chipotle Mexican and BJs Restaurants
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and BJs Restaurants 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 BJs Restaurants 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 BJs Restaurants, you can compare the effects of market volatilities on Chipotle Mexican and BJs Restaurants 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 BJs Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and BJs Restaurants.
Diversification Opportunities for Chipotle Mexican and BJs Restaurants
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chipotle and BJs is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants 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 BJs Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Restaurants has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and BJs Restaurants go up and down completely randomly.
Pair Corralation between Chipotle Mexican and BJs Restaurants
Considering the 90-day investment horizon Chipotle Mexican Grill is expected to under-perform the BJs Restaurants. But the stock apears to be less risky and, when comparing its historical volatility, Chipotle Mexican Grill is 1.29 times less risky than BJs Restaurants. The stock trades about -0.11 of its potential returns per unit of risk. The BJs Restaurants is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 3,721 in BJs Restaurants on October 26, 2024 and sell it today you would lose (184.00) from holding BJs Restaurants or give up 4.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.5% |
| Values | Daily Returns |
Chipotle Mexican Grill vs. BJs Restaurants
Performance |
| Timeline |
| Chipotle Mexican Grill |
| BJs Restaurants |
Chipotle Mexican and BJs Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and BJs Restaurants
The main advantage of trading using opposite Chipotle Mexican and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, BJs Restaurants 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 BJs Restaurants will offset losses from the drop in BJs Restaurants' long position.| Chipotle Mexican vs. Starbucks | Chipotle Mexican vs. Dominos Pizza Common | Chipotle Mexican vs. Yum Brands | Chipotle Mexican vs. The Wendys Co |
| BJs Restaurants vs. Chipotle Mexican Grill | BJs Restaurants vs. Dominos Pizza Common | BJs Restaurants vs. Yum Brands | BJs Restaurants vs. The Wendys Co |
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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