Correlation Between Chipotle Mexican and RBC Bearings
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and RBC Bearings 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 RBC Bearings 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 RBC Bearings Incorporated, you can compare the effects of market volatilities on Chipotle Mexican and RBC Bearings 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 RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and RBC Bearings.
Diversification Opportunities for Chipotle Mexican and RBC Bearings
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chipotle and RBC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings 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 RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and RBC Bearings go up and down completely randomly.
Pair Corralation between Chipotle Mexican and RBC Bearings
Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 1.09 times more return on investment than RBC Bearings. However, Chipotle Mexican is 1.09 times more volatile than RBC Bearings Incorporated. It trades about 0.08 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.08 per unit of risk. If you would invest 4,189 in Chipotle Mexican Grill on September 12, 2024 and sell it today you would earn a total of 2,269 from holding Chipotle Mexican Grill or generate 54.17% 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. RBC Bearings Incorporated
Performance |
| Timeline |
| Chipotle Mexican Grill |
| RBC Bearings |
Chipotle Mexican and RBC Bearings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and RBC Bearings
The main advantage of trading using opposite Chipotle Mexican and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, RBC Bearings 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 RBC Bearings will offset losses from the drop in RBC Bearings' long position.| Chipotle Mexican vs. Starbucks | Chipotle Mexican vs. Dominos Pizza | Chipotle Mexican vs. Yum Brands | Chipotle Mexican vs. The Wendys Co |
| RBC Bearings vs. Kennametal | RBC Bearings vs. Snap On | RBC Bearings vs. Eastern Co | RBC Bearings vs. Lincoln Electric Holdings |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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