Correlation Between Bill and Chipotle Mexican

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

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

Diversification Opportunities for Bill and Chipotle Mexican

0.75

Correlation Coefficient

Bill  Chipotle Mexican

Poor diversification

The 3 months correlation between Bill and Chipotle is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bill Com Holdings 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 Bill 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 Bill Com Holdings 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 Bill i.e., Bill and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Bill and Chipotle Mexican

Given the investment horizon of 90 days Bill is expected to generate 5.7 times less return on investment than Chipotle Mexican. In addition to that, Bill is 2.11 times more volatile than Chipotle Mexican Grill. It trades about 0.01 of its total potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.1 per unit of volatility. If you would invest  2,742  in Chipotle Mexican Grill on September 24, 2024 and sell it today you would earn a total of  3,445  from holding Chipotle Mexican Grill or generate 125.64% return on investment over 90 days.

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

Bill Com Holdings  vs.  Chipotle Mexican Grill

Bill Com Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bill Com Holdings are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Bill disclosed solid returns over the last few months and may actually be approaching a breakup point.

Chipotle Mexican Grill

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Chipotle Mexican may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bill and Chipotle Mexican

The main advantage of trading using opposite Bill and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bill 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 Bill Com Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.