Correlation Between Chipotle Mexican and Gourmet Provisions
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Gourmet Provisions 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 Gourmet Provisions 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 Gourmet Provisions International, you can compare the effects of market volatilities on Chipotle Mexican and Gourmet Provisions 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 Gourmet Provisions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Gourmet Provisions.
Diversification Opportunities for Chipotle Mexican and Gourmet Provisions
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chipotle and Gourmet is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Gourmet Provisions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gourmet Provisions 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 Gourmet Provisions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gourmet Provisions has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Gourmet Provisions go up and down completely randomly.
Pair Corralation between Chipotle Mexican and Gourmet Provisions
Considering the 90-day investment horizon Chipotle Mexican is expected to generate 61.12 times less return on investment than Gourmet Provisions. But when comparing it to its historical volatility, Chipotle Mexican Grill is 19.41 times less risky than Gourmet Provisions. It trades about 0.04 of its potential returns per unit of risk. Gourmet Provisions International is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 0.04 in Gourmet Provisions International on September 1, 2024 and sell it today you would lose (0.03) from holding Gourmet Provisions International or give up 75.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chipotle Mexican Grill vs. Gourmet Provisions Internation
Performance |
| Timeline |
| Chipotle Mexican Grill |
| Gourmet Provisions |
Chipotle Mexican and Gourmet Provisions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and Gourmet Provisions
The main advantage of trading using opposite Chipotle Mexican and Gourmet Provisions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Gourmet Provisions 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 Gourmet Provisions will offset losses from the drop in Gourmet Provisions' long position.| Chipotle Mexican vs. The Wendys Co | Chipotle Mexican vs. Shake Shack | Chipotle Mexican vs. Papa Johns International | Chipotle Mexican vs. Darden Restaurants |
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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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