Correlation Between Chipotle Mexican and Goldman Sachs

Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Goldman Sachs 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 Goldman Sachs 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 The Goldman Sachs, you can compare the effects of market volatilities on Chipotle Mexican and Goldman Sachs 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 Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Goldman Sachs.

Diversification Opportunities for Chipotle Mexican and Goldman Sachs

0.87

Correlation Coefficient

Chipotle Mexican  Goldman Sachs

Very poor diversification

The 3 months correlation between Chipotle and Goldman is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Goldman Sachs go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Goldman Sachs

Assuming the 90 days trading horizon Chipotle Mexican Grill is expected to generate 1.59 times more return on investment than Goldman Sachs. However, Chipotle Mexican is 1.59 times more volatile than The Goldman Sachs. It trades about 0.29 of its potential returns per unit of risk. The Goldman Sachs is currently generating about 0.01 per unit of risk. If you would invest  117,210  in Chipotle Mexican Grill on September 17, 2024 and sell it today you would earn a total of  12,790  from holding Chipotle Mexican Grill or generate 10.91% return on investment over 90 days.

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

Chipotle Mexican Grill  vs.  The Goldman Sachs

Chipotle Mexican Grill

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Chipotle Mexican showed solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Goldman Sachs showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chipotle Mexican and Goldman Sachs

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

The idea behind Chipotle Mexican Grill and The Goldman Sachs 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.