Correlation Between United States and Chipotle Mexican
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Chipotle Mexican into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Chipotle Mexican Grill, you can compare the effects of market volatilities on United States 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 United States with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Chipotle Mexican.
Diversification Opportunities for United States and Chipotle Mexican
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Chipotle is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and Chipotle Mexican go up and down completely randomly.
Pair Corralation between United States and Chipotle Mexican
Given the investment horizon of 90 days United States is expected to generate 2.99 times less return on investment than Chipotle Mexican. In addition to that, United States is 1.44 times more volatile than Chipotle Mexican Grill. It trades about 0.06 of its total potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.25 per unit of volatility. If you would invest 112,898 in Chipotle Mexican Grill on August 31, 2024 and sell it today you would earn a total of 15,824 from holding Chipotle Mexican Grill or generate 14.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
United States Steel vs. Chipotle Mexican Grill
Performance |
| Timeline |
| United States Steel |
| Chipotle Mexican Grill |
United States and Chipotle Mexican Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Chipotle Mexican
The main advantage of trading using opposite United States and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Delta Air Lines | United States vs. Grupo Carso SAB | United States vs. McEwen Mining | United States vs. Monster Beverage Corp |
| Chipotle Mexican vs. DXC Technology | Chipotle Mexican vs. Micron Technology | Chipotle Mexican vs. Deutsche Bank Aktiengesellschaft | Chipotle Mexican vs. First Republic Bank |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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