Correlation Between Chipotle Mexican and Organizacin Cultiba

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

Diversification Opportunities for Chipotle Mexican and Organizacin Cultiba

-0.32

Correlation Coefficient

Chipotle Mexican  Organizacin Cultiba

Very good diversification

The 3 months correlation between Chipotle and Organizacin is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Organizacin Cultiba SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organizacin Cultiba SAB 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 Organizacin Cultiba. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organizacin Cultiba SAB has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Organizacin Cultiba go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Organizacin Cultiba

Assuming the 90 days trading horizon Chipotle Mexican Grill is expected to generate 1.28 times more return on investment than Organizacin Cultiba. However, Chipotle Mexican is 1.28 times more volatile than Organizacin Cultiba SAB. It trades about 0.13 of its potential returns per unit of risk. Organizacin Cultiba SAB is currently generating about 0.09 per unit of risk. If you would invest  117,210  in Chipotle Mexican Grill on September 20, 2024 and sell it today you would earn a total of  6,791  from holding Chipotle Mexican Grill or generate 5.79% return on investment over 90 days.

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

Chipotle Mexican Grill  vs.  Organizacin Cultiba SAB

Chipotle Mexican Grill

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Chipotle Mexican showed solid returns over the last few months and may actually be approaching a breakup point.

Organizacin Cultiba SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Organizacin Cultiba SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Organizacin Cultiba is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chipotle Mexican and Organizacin Cultiba

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

The idea behind Chipotle Mexican Grill and Organizacin Cultiba SAB 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.