Correlation Between BJs Restaurants and Chipotle Mexican

Can any of the company-specific risk be diversified away by investing in both BJs 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 BJs 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 BJs Restaurants and Chipotle Mexican Grill, you can compare the effects of market volatilities on BJs 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 BJs Restaurants with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and Chipotle Mexican.

Diversification Opportunities for BJs Restaurants and Chipotle Mexican

0.2

Correlation Coefficient

BJs Restaurants  Chipotle Mexican

Modest diversification

The 3 months correlation between BJs and Chipotle is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants 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 BJs 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 BJs Restaurants 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 BJs Restaurants i.e., BJs Restaurants and Chipotle Mexican go up and down completely randomly.

Pair Corralation between BJs Restaurants and Chipotle Mexican

Given the investment horizon of 90 days BJs Restaurants is expected to generate 1.31 times more return on investment than Chipotle Mexican. However, BJs Restaurants is 1.31 times more volatile than Chipotle Mexican Grill. It trades about 0.04 of its potential returns per unit of risk. Chipotle Mexican Grill is currently generating about -0.16 per unit of risk. If you would invest  3,482  in BJs Restaurants on December 28, 2024 and sell it today you would earn a total of  163.00  from holding BJs Restaurants or generate 4.68% return on investment over 90 days.

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

BJs Restaurants  vs.  Chipotle Mexican Grill

BJs Restaurants

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, BJs Restaurants may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Chipotle Mexican Grill

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chipotle Mexican Grill has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BJs Restaurants and Chipotle Mexican

The main advantage of trading using opposite BJs Restaurants and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs 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 BJs Restaurants 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.