Correlation Between Chipotle Mexican and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Japan Tobacco 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 Japan Tobacco 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 Japan Tobacco ADR, you can compare the effects of market volatilities on Chipotle Mexican and Japan Tobacco 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 Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Japan Tobacco.
Diversification Opportunities for Chipotle Mexican and Japan Tobacco
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Chipotle and Japan is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Japan Tobacco ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco ADR 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 Japan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Tobacco ADR has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Japan Tobacco go up and down completely randomly.
Pair Corralation between Chipotle Mexican and Japan Tobacco
Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 1.52 times more return on investment than Japan Tobacco. However, Chipotle Mexican is 1.52 times more volatile than Japan Tobacco ADR. It trades about 0.08 of its potential returns per unit of risk. Japan Tobacco ADR is currently generating about 0.03 per unit of risk. If you would invest 4,453 in Chipotle Mexican Grill on September 2, 2024 and sell it today you would earn a total of 1,699 from holding Chipotle Mexican Grill or generate 38.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chipotle Mexican Grill vs. Japan Tobacco ADR
Performance |
| Timeline |
| Chipotle Mexican Grill |
| Japan Tobacco ADR |
Chipotle Mexican and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and Japan Tobacco
The main advantage of trading using opposite Chipotle Mexican and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Japan Tobacco 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 Japan Tobacco will offset losses from the drop in Japan Tobacco's long position.| Chipotle Mexican vs. Starbucks | Chipotle Mexican vs. Dominos Pizza | Chipotle Mexican vs. Yum Brands | Chipotle Mexican vs. The Wendys Co |
| Japan Tobacco vs. British American Tobacco | Japan Tobacco vs. Imperial Brands PLC | Japan Tobacco vs. RLX Technology | Japan Tobacco vs. British American Tobacco |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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