Correlation Between COMPASS GROUP and Chipotle Mexican
Can any of the company-specific risk be diversified away by investing in both COMPASS GROUP 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 COMPASS GROUP and Chipotle Mexican into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COMPASS GROUP and Chipotle Mexican Grill, you can compare the effects of market volatilities on COMPASS GROUP 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 COMPASS GROUP with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMPASS GROUP and Chipotle Mexican.
Diversification Opportunities for COMPASS GROUP and Chipotle Mexican
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between COMPASS and Chipotle is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding COMPASS GROUP 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 COMPASS GROUP 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 COMPASS GROUP 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 COMPASS GROUP i.e., COMPASS GROUP and Chipotle Mexican go up and down completely randomly.
Pair Corralation between COMPASS GROUP and Chipotle Mexican
Assuming the 90 days horizon COMPASS GROUP is expected to generate 1.78 times less return on investment than Chipotle Mexican. But when comparing it to its historical volatility, COMPASS GROUP is 1.47 times less risky than Chipotle Mexican. It trades about 0.07 of its potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,005 in Chipotle Mexican Grill on August 24, 2024 and sell it today you would earn a total of 2,956 from holding Chipotle Mexican Grill or generate 98.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
COMPASS GROUP vs. Chipotle Mexican Grill
Performance |
| Timeline |
| COMPASS GROUP |
| Chipotle Mexican Grill |
COMPASS GROUP and Chipotle Mexican Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with COMPASS GROUP and Chipotle Mexican
The main advantage of trading using opposite COMPASS GROUP and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMPASS GROUP 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.| COMPASS GROUP vs. NIPPON STEEL SPADR | COMPASS GROUP vs. BLUESCOPE STEEL | COMPASS GROUP vs. ALGOMA STEEL GROUP | COMPASS GROUP vs. Southwest Airlines Co |
| Chipotle Mexican vs. Superior Plus Corp | Chipotle Mexican vs. NMI Holdings | Chipotle Mexican vs. Origin Agritech | Chipotle Mexican vs. SIVERS SEMICONDUCTORS AB |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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