Correlation Between Axway Software and Chipotle Mexican

Can any of the company-specific risk be diversified away by investing in both Axway Software 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 Axway Software and Chipotle Mexican into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Axway Software SA and Chipotle Mexican Grill, you can compare the effects of market volatilities on Axway Software 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 Axway Software with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axway Software and Chipotle Mexican.

Diversification Opportunities for Axway Software and Chipotle Mexican

0.58

Correlation Coefficient

Axway Software  Chipotle Mexican

Very weak diversification

The 3 months correlation between Axway and Chipotle is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Axway Software SA 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 Axway Software 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 Axway Software SA 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 Axway Software i.e., Axway Software and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Axway Software and Chipotle Mexican

Assuming the 90 days trading horizon Axway Software is expected to generate 2.87 times less return on investment than Chipotle Mexican. But when comparing it to its historical volatility, Axway Software SA is 1.11 times less risky than Chipotle Mexican. It trades about 0.03 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  2,946  in Chipotle Mexican Grill on October 5, 2024 and sell it today you would earn a total of  2,838  from holding Chipotle Mexican Grill or generate 96.33% return on investment over 90 days.

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

Axway Software SA  vs.  Chipotle Mexican Grill

Axway Software SA

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Axway Software SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Axway Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Chipotle Mexican Grill

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Chipotle Mexican Grill has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Chipotle Mexican reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axway Software and Chipotle Mexican

The main advantage of trading using opposite Axway Software and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axway Software 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.

The idea behind Axway Software SA and Chipotle Mexican Grill 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.