Correlation Between Chipotle Mexican and Flanigans Enterprises

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

Diversification Opportunities for Chipotle Mexican and Flanigans Enterprises

-0.28

Correlation Coefficient

Chipotle Mexican  Flanigans Enterprises

Very good diversification

The 3 months correlation between Chipotle and Flanigans is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Flanigans Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flanigans Enterprises 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 Flanigans Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flanigans Enterprises has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Flanigans Enterprises go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Flanigans Enterprises

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to under-perform the Flanigans Enterprises. But the stock apears to be less risky and, when comparing its historical volatility, Chipotle Mexican Grill is 1.27 times less risky than Flanigans Enterprises. The stock trades about -0.34 of its potential returns per unit of risk. The Flanigans Enterprises is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,464  in Flanigans Enterprises on October 21, 2024 and sell it today you would earn a total of  26.00  from holding Flanigans Enterprises or generate 1.06% return on investment over 90 days.

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

Chipotle Mexican Grill  vs.  Flanigans Enterprises

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. 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.

Flanigans Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flanigans Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Flanigans Enterprises is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Chipotle Mexican and Flanigans Enterprises

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

The idea behind Chipotle Mexican Grill and Flanigans Enterprises 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.