Correlation Between Chipotle Mexican and BlackRock

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

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

Diversification Opportunities for Chipotle Mexican and BlackRock

0.71

Correlation Coefficient

Chipotle Mexican  BlackRock

Poor diversification

The 3 months correlation between Chipotle and BlackRock is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock and Chipotle Mexican 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 Chipotle Mexican Grill are associated (or correlated) with BlackRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and BlackRock go up and down completely randomly.

Pair Corralation between Chipotle Mexican and BlackRock

Assuming the 90 days trading horizon Chipotle Mexican Grill is expected to under-perform the BlackRock. In addition to that, Chipotle Mexican is 1.19 times more volatile than BlackRock. It trades about -0.14 of its total potential returns per unit of risk. BlackRock is currently generating about -0.06 per unit of volatility. If you would invest  2,117,500  in BlackRock on December 5, 2024 and sell it today you would lose (142,500) from holding BlackRock or give up 6.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Chipotle Mexican Grill  vs.  BlackRock

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. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

BlackRock

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Chipotle Mexican and BlackRock

The main advantage of trading using opposite Chipotle Mexican and BlackRock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, BlackRock 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 BlackRock will offset losses from the drop in BlackRock's long position.

The idea behind Chipotle Mexican Grill and BlackRock 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.