Correlation Between Chipotle Mexican and Rave Restaurant
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Rave Restaurant 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 Rave Restaurant 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 Rave Restaurant Group, you can compare the effects of market volatilities on Chipotle Mexican and Rave Restaurant 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 Rave Restaurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Rave Restaurant.
Diversification Opportunities for Chipotle Mexican and Rave Restaurant
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chipotle and Rave is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Rave Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rave Restaurant 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 Rave Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rave Restaurant Group has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Rave Restaurant go up and down completely randomly.
Pair Corralation between Chipotle Mexican and Rave Restaurant
Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 0.55 times more return on investment than Rave Restaurant. However, Chipotle Mexican Grill is 1.81 times less risky than Rave Restaurant. It trades about 0.11 of its potential returns per unit of risk. Rave Restaurant Group is currently generating about 0.04 per unit of risk. If you would invest 3,819 in Chipotle Mexican Grill on August 24, 2024 and sell it today you would earn a total of 2,382 from holding Chipotle Mexican Grill or generate 62.37% 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. Rave Restaurant Group
Performance |
| Timeline |
| Chipotle Mexican Grill |
| Rave Restaurant Group |
Chipotle Mexican and Rave Restaurant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and Rave Restaurant
The main advantage of trading using opposite Chipotle Mexican and Rave Restaurant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Rave Restaurant 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 Rave Restaurant will offset losses from the drop in Rave Restaurant's long position.| Chipotle Mexican vs. Starbucks | Chipotle Mexican vs. Dominos Pizza | Chipotle Mexican vs. Yum Brands | Chipotle Mexican vs. The Wendys Co |
| Rave Restaurant vs. Ark Restaurants Corp | Rave Restaurant vs. One Group Hospitality | Rave Restaurant vs. Flanigans Enterprises | Rave Restaurant vs. Noble Romans |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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