Correlation Between Chipotle Mexican and Yum China
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Yum China 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 Yum China 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 Yum China Holdings, you can compare the effects of market volatilities on Chipotle Mexican and Yum China 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 Yum China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Yum China.
Diversification Opportunities for Chipotle Mexican and Yum China
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chipotle and Yum is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Yum China Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum China Holdings 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 Yum China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yum China Holdings has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Yum China go up and down completely randomly.
Pair Corralation between Chipotle Mexican and Yum China
Considering the 90-day investment horizon Chipotle Mexican is expected to generate 2.26 times less return on investment than Yum China. In addition to that, Chipotle Mexican is 1.16 times more volatile than Yum China Holdings. It trades about 0.05 of its total potential returns per unit of risk. Yum China Holdings is currently generating about 0.14 per unit of volatility. If you would invest 4,470 in Yum China Holdings on August 28, 2024 and sell it today you would earn a total of 288.00 from holding Yum China Holdings or generate 6.44% 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. Yum China Holdings
Performance |
| Timeline |
| Chipotle Mexican Grill |
| Yum China Holdings |
Chipotle Mexican and Yum China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and Yum China
The main advantage of trading using opposite Chipotle Mexican and Yum China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Yum China 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 Yum China will offset losses from the drop in Yum China's long position.| Chipotle Mexican vs. Starbucks | Chipotle Mexican vs. Dominos Pizza | Chipotle Mexican vs. Yum Brands | Chipotle Mexican vs. The Wendys Co |
| Yum China vs. Darden Restaurants | Yum China vs. The Wendys Co | Yum China vs. Dominos Pizza | Yum China vs. Restaurant Brands International |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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