Correlation Between Chipotle Mexican and Cracker Barrel

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

Diversification Opportunities for Chipotle Mexican and Cracker Barrel

0.75

Correlation Coefficient

Chipotle Mexican  Cracker Barrel

Poor diversification

The 3 months correlation between Chipotle and Cracker is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Cracker Barrel Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cracker Barrel Old 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 Cracker Barrel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cracker Barrel Old has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Cracker Barrel go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Cracker Barrel

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 0.49 times more return on investment than Cracker Barrel. However, Chipotle Mexican Grill is 2.04 times less risky than Cracker Barrel. It trades about -0.18 of its potential returns per unit of risk. Cracker Barrel Old is currently generating about -0.14 per unit of risk. If you would invest  6,147  in Chipotle Mexican Grill on December 26, 2024 and sell it today you would lose (1,141) from holding Chipotle Mexican Grill or give up 18.56% of portfolio value over 90 days.

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

Chipotle Mexican Grill  vs.  Cracker Barrel Old

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. Despite weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Cracker Barrel Old

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cracker Barrel Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Chipotle Mexican and Cracker Barrel

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

The idea behind Chipotle Mexican Grill and Cracker Barrel Old 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.