Correlation Between Century Communities and Chipotle Mexican

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

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

Diversification Opportunities for Century Communities and Chipotle Mexican

-0.42

Correlation Coefficient

Century Communities  Chipotle Mexican

Very good diversification

The 3 months correlation between Century and Chipotle is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Century Communities 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 Century Communities 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 Century Communities 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 Century Communities i.e., Century Communities and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Century Communities and Chipotle Mexican

Considering the 90-day investment horizon Century Communities is expected to generate 1.89 times less return on investment than Chipotle Mexican. In addition to that, Century Communities is 1.29 times more volatile than Chipotle Mexican Grill. It trades about 0.03 of its total potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.08 per unit of volatility. If you would invest  3,103  in Chipotle Mexican Grill on October 8, 2024 and sell it today you would earn a total of  2,867  from holding Chipotle Mexican Grill or generate 92.39% return on investment over 90 days.

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

Century Communities  vs.  Chipotle Mexican Grill

Century Communities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Communities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Chipotle Mexican Grill

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Chipotle Mexican is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Century Communities and Chipotle Mexican

The main advantage of trading using opposite Century Communities and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Communities 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 Century Communities 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.