Correlation Between Chipotle Mexican and Fibra Terrafina

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

Diversification Opportunities for Chipotle Mexican and Fibra Terrafina

-0.01

Correlation Coefficient

Chipotle Mexican  Fibra Terrafina

Good diversification

The 3 months correlation between Chipotle and Fibra is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Fibra Terrafina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fibra Terrafina 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 Fibra Terrafina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fibra Terrafina has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Fibra Terrafina go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Fibra Terrafina

Assuming the 90 days trading horizon Chipotle Mexican Grill is expected to under-perform the Fibra Terrafina. But the stock apears to be less risky and, when comparing its historical volatility, Chipotle Mexican Grill is 1.43 times less risky than Fibra Terrafina. The stock trades about -0.02 of its potential returns per unit of risk. The Fibra Terrafina is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,729  in Fibra Terrafina on October 26, 2024 and sell it today you would lose (84.00) from holding Fibra Terrafina or give up 2.25% of portfolio value over 90 days.

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

Chipotle Mexican Grill  vs.  Fibra Terrafina

Chipotle Mexican Grill

Risk-Adjusted Performance

0 of 100

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 fairly strong technical and fundamental indicators, Chipotle Mexican is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fibra Terrafina

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fibra Terrafina has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fibra Terrafina is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chipotle Mexican and Fibra Terrafina

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

The idea behind Chipotle Mexican Grill and Fibra Terrafina 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.