Correlation Between Chipotle Mexican and Dominos Pizza
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Dominos Pizza 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 Dominos Pizza 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 Dominos Pizza Group, you can compare the effects of market volatilities on Chipotle Mexican and Dominos Pizza 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 Dominos Pizza. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Dominos Pizza.
Diversification Opportunities for Chipotle Mexican and Dominos Pizza
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chipotle and Dominos is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Dominos Pizza Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza Group 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 Dominos Pizza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dominos Pizza Group has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Dominos Pizza go up and down completely randomly.
Pair Corralation between Chipotle Mexican and Dominos Pizza
Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 0.66 times more return on investment than Dominos Pizza. However, Chipotle Mexican Grill is 1.53 times less risky than Dominos Pizza. It trades about 0.25 of its potential returns per unit of risk. Dominos Pizza Group is currently generating about 0.13 per unit of risk. If you would invest 5,927 in Chipotle Mexican Grill on September 14, 2024 and sell it today you would earn a total of 554.00 from holding Chipotle Mexican Grill or generate 9.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Chipotle Mexican Grill vs. Dominos Pizza Group
Performance |
| Timeline |
| Chipotle Mexican Grill |
| Dominos Pizza Group |
Chipotle Mexican and Dominos Pizza Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and Dominos Pizza
The main advantage of trading using opposite Chipotle Mexican and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Dominos Pizza 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 Dominos Pizza will offset losses from the drop in Dominos Pizza's long position.The idea behind Chipotle Mexican Grill and Dominos Pizza Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Dominos Pizza vs. Parker Hannifin | Dominos Pizza vs. Nabors Industries | Dominos Pizza vs. Precision Drilling | Dominos Pizza vs. Tritent International Agriculture |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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