Correlation Between Chipotle Mexican and Fairwood Holdings
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Fairwood Holdings 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 Fairwood Holdings 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 Fairwood Holdings Limited, you can compare the effects of market volatilities on Chipotle Mexican and Fairwood Holdings 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 Fairwood Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Fairwood Holdings.
Diversification Opportunities for Chipotle Mexican and Fairwood Holdings
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chipotle and Fairwood is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Fairwood Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairwood Holdings 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 Fairwood Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairwood Holdings has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Fairwood Holdings go up and down completely randomly.
Pair Corralation between Chipotle Mexican and Fairwood Holdings
Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 0.65 times more return on investment than Fairwood Holdings. However, Chipotle Mexican Grill is 1.55 times less risky than Fairwood Holdings. It trades about 0.09 of its potential returns per unit of risk. Fairwood Holdings Limited is currently generating about 0.02 per unit of risk. If you would invest 3,122 in Chipotle Mexican Grill on September 2, 2024 and sell it today you would earn a total of 3,030 from holding Chipotle Mexican Grill or generate 97.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chipotle Mexican Grill vs. Fairwood Holdings Limited
Performance |
| Timeline |
| Chipotle Mexican Grill |
| Fairwood Holdings |
Chipotle Mexican and Fairwood Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and Fairwood Holdings
The main advantage of trading using opposite Chipotle Mexican and Fairwood Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Fairwood Holdings 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 Fairwood Holdings will offset losses from the drop in Fairwood Holdings' long position.| Chipotle Mexican vs. Starbucks | Chipotle Mexican vs. Dominos Pizza | Chipotle Mexican vs. Yum Brands | Chipotle Mexican vs. The Wendys Co |
| Fairwood Holdings vs. McDonalds | Fairwood Holdings vs. Starbucks | Fairwood Holdings vs. Chipotle Mexican Grill | Fairwood Holdings vs. Compass Group PLC |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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