Correlation Between Chipotle Mexican and British American
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on Chipotle Mexican and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and British American.
Diversification Opportunities for Chipotle Mexican and British American
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Chipotle and British is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and British American go up and down completely randomly.
Pair Corralation between Chipotle Mexican and British American
Assuming the 90 days trading horizon Chipotle Mexican Grill is expected to generate 147.19 times more return on investment than British American. However, Chipotle Mexican is 147.19 times more volatile than British American Tobacco. It trades about 0.24 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.0 per unit of risk. If you would invest 711.00 in Chipotle Mexican Grill on March 29, 2024 and sell it today you would earn a total of 1,070 from holding Chipotle Mexican Grill or generate 150.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 98.99% |
Values | Daily Returns |
Chipotle Mexican Grill vs. British American Tobacco
Performance |
Timeline |
Chipotle Mexican Grill |
British American Tobacco |
Chipotle Mexican and British American Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chipotle Mexican and British American
The main advantage of trading using opposite Chipotle Mexican and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.Chipotle Mexican vs. Taiwan Semiconductor Manufacturing | Chipotle Mexican vs. Banco Santander Chile | Chipotle Mexican vs. BTG Pactual Logstica | Chipotle Mexican vs. NAVI CRDITO IMOBILIRIO |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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