Correlation Between Chipotle Mexican and VinFast Auto

Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and VinFast Auto 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 VinFast Auto 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 VinFast Auto Ltd, you can compare the effects of market volatilities on Chipotle Mexican and VinFast Auto 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 VinFast Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and VinFast Auto.

Diversification Opportunities for Chipotle Mexican and VinFast Auto

-0.79

Correlation Coefficient

Chipotle Mexican  VinFast Auto

Pay attention - limited upside

The 3 months correlation between Chipotle and VinFast is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and VinFast Auto Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VinFast Auto 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 VinFast Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VinFast Auto has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and VinFast Auto go up and down completely randomly.

Pair Corralation between Chipotle Mexican and VinFast Auto

Considering the 90-day investment horizon Chipotle Mexican is expected to generate 6.06 times less return on investment than VinFast Auto. But when comparing it to its historical volatility, Chipotle Mexican Grill is 5.56 times less risky than VinFast Auto. It trades about 0.27 of its potential returns per unit of risk. VinFast Auto Ltd is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  41.00  in VinFast Auto Ltd on February 22, 2024 and sell it today you would earn a total of  27.00  from holding VinFast Auto Ltd or generate 65.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Chipotle Mexican Grill  vs.  VinFast Auto Ltd

Chipotle Mexican Grill

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Chipotle Mexican reported solid returns over the last few months and may actually be approaching a breakup point.

VinFast Auto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VinFast Auto Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, VinFast Auto is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chipotle Mexican and VinFast Auto

The main advantage of trading using opposite Chipotle Mexican and VinFast Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, VinFast Auto 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 VinFast Auto will offset losses from the drop in VinFast Auto's long position.

The idea behind Chipotle Mexican Grill and VinFast Auto Ltd 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.