Correlation Between Chipotle Mexican and Luckin Coffee
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Luckin Coffee 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 Luckin Coffee 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 Luckin Coffee, you can compare the effects of market volatilities on Chipotle Mexican and Luckin Coffee 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 Luckin Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Luckin Coffee.
Diversification Opportunities for Chipotle Mexican and Luckin Coffee
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Chipotle and Luckin is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Luckin Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luckin Coffee 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 Luckin Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luckin Coffee has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Luckin Coffee go up and down completely randomly.
Pair Corralation between Chipotle Mexican and Luckin Coffee
Considering the 90-day investment horizon Chipotle Mexican is expected to generate 1.25 times less return on investment than Luckin Coffee. But when comparing it to its historical volatility, Chipotle Mexican Grill is 2.42 times less risky than Luckin Coffee. It trades about 0.09 of its potential returns per unit of risk. Luckin Coffee is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,260 in Luckin Coffee on September 5, 2024 and sell it today you would earn a total of 416.00 from holding Luckin Coffee or generate 18.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 30.51% |
| Values | Daily Returns |
Chipotle Mexican Grill vs. Luckin Coffee
Performance |
| Timeline |
| Chipotle Mexican Grill |
| Luckin Coffee |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Chipotle Mexican and Luckin Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and Luckin Coffee
The main advantage of trading using opposite Chipotle Mexican and Luckin Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Luckin Coffee 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 Luckin Coffee will offset losses from the drop in Luckin Coffee's long position.| Chipotle Mexican vs. Starbucks | Chipotle Mexican vs. Dominos Pizza | Chipotle Mexican vs. Yum Brands | Chipotle Mexican vs. The Wendys Co |
| Luckin Coffee vs. Shake Shack | Luckin Coffee vs. Dominos Pizza | Luckin Coffee vs. Papa Johns International | Luckin Coffee vs. Chipotle Mexican Grill |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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