Correlation Between Ark Restaurants and Chipotle Mexican

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

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

Diversification Opportunities for Ark Restaurants and Chipotle Mexican

0.43

Correlation Coefficient

Ark Restaurants  Chipotle Mexican

Very weak diversification

The 3 months correlation between Ark and Chipotle is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ark Restaurants Corp 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 Ark Restaurants 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 Ark Restaurants Corp 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 Ark Restaurants i.e., Ark Restaurants and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Ark Restaurants and Chipotle Mexican

Given the investment horizon of 90 days Ark Restaurants Corp is expected to generate 4.75 times more return on investment than Chipotle Mexican. However, Ark Restaurants is 4.75 times more volatile than Chipotle Mexican Grill. It trades about 0.12 of its potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.26 per unit of risk. If you would invest  1,025  in Ark Restaurants Corp on September 18, 2024 and sell it today you would earn a total of  154.00  from holding Ark Restaurants Corp or generate 15.02% return on investment over 90 days.

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

Ark Restaurants Corp  vs.  Chipotle Mexican Grill

Ark Restaurants Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ark Restaurants Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward-looking signals, Ark Restaurants may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Chipotle Mexican Grill

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 8 (%) 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.

Pair Trading with Ark Restaurants and Chipotle Mexican

The main advantage of trading using opposite Ark Restaurants and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ark Restaurants 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 Ark Restaurants Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.