Correlation Between Stepan and Chipotle Mexican
Can any of the company-specific risk be diversified away by investing in both Stepan and Chipotle Mexican 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 Stepan and Chipotle Mexican into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Chipotle Mexican Grill, you can compare the effects of market volatilities on Stepan and Chipotle Mexican 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 Stepan with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Chipotle Mexican.
Diversification Opportunities for Stepan and Chipotle Mexican
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Stepan and Chipotle is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Chipotle Mexican Grill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chipotle Mexican Grill and Stepan 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 Stepan Company are associated (or correlated) with Chipotle Mexican. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chipotle Mexican Grill has no effect on the direction of Stepan i.e., Stepan and Chipotle Mexican go up and down completely randomly.
Pair Corralation between Stepan and Chipotle Mexican
Considering the 90-day investment horizon Stepan is expected to generate 2.65 times less return on investment than Chipotle Mexican. In addition to that, Stepan is 1.41 times more volatile than Chipotle Mexican Grill. It trades about 0.09 of its total potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.34 per unit of volatility. If you would invest 5,638 in Chipotle Mexican Grill on September 5, 2024 and sell it today you would earn a total of 751.00 from holding Chipotle Mexican Grill or generate 13.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Chipotle Mexican Grill
Performance |
| Timeline |
| Stepan Company |
| Chipotle Mexican Grill |
Stepan and Chipotle Mexican Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Chipotle Mexican
The main advantage of trading using opposite Stepan and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Chipotle Mexican 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 Chipotle Mexican will offset losses from the drop in Chipotle Mexican's long position.The idea behind Stepan Company and Chipotle Mexican Grill pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Chipotle Mexican vs. Starbucks | Chipotle Mexican vs. Dominos Pizza | Chipotle Mexican vs. Yum Brands | Chipotle Mexican vs. The Wendys Co |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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