Correlation Between Visa and Chipotle Mexican
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Chipotle Mexican into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Chipotle Mexican Grill, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Chipotle Mexican.
Diversification Opportunities for Visa and Chipotle Mexican
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Chipotle is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A 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 Visa 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 Visa Class A 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 Visa i.e., Visa and Chipotle Mexican go up and down completely randomly.
Pair Corralation between Visa and Chipotle Mexican
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.16 times more return on investment than Chipotle Mexican. However, Visa Class A is 6.36 times less risky than Chipotle Mexican. It trades about 0.09 of its potential returns per unit of risk. Chipotle Mexican Grill is currently generating about -0.02 per unit of risk. If you would invest 25,387 in Visa Class A on September 2, 2024 and sell it today you would earn a total of 6,121 from holding Visa Class A or generate 24.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Visa Class A vs. Chipotle Mexican Grill
Performance |
| Timeline |
| Visa Class A |
| Chipotle Mexican Grill |
Visa and Chipotle Mexican Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Chipotle Mexican
The main advantage of trading using opposite Visa and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Chipotle Mexican vs. GMxico Transportes SAB | Chipotle Mexican vs. Southwest Airlines | Chipotle Mexican vs. United Airlines Holdings | Chipotle Mexican vs. Verizon Communications |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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