Correlation Between Chipotle Mexican and GEN Restaurant

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

Diversification Opportunities for Chipotle Mexican and GEN Restaurant

0.05

Correlation Coefficient

Chipotle Mexican  GEN Restaurant

Significant diversification

The 3 months correlation between Chipotle and GEN is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and GEN Restaurant Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEN Restaurant Group, 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 GEN Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEN Restaurant Group, has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and GEN Restaurant go up and down completely randomly.

Pair Corralation between Chipotle Mexican and GEN Restaurant

Considering the 90-day investment horizon Chipotle Mexican is expected to generate 20.25 times less return on investment than GEN Restaurant. But when comparing it to its historical volatility, Chipotle Mexican Grill is 28.79 times less risky than GEN Restaurant. It trades about 0.07 of its potential returns per unit of risk. GEN Restaurant Group, is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.00  in GEN Restaurant Group, on October 27, 2024 and sell it today you would earn a total of  672.00  from holding GEN Restaurant Group, or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.36%
Values	Daily Returns

Chipotle Mexican Grill  vs.  GEN Restaurant Group,

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.

GEN Restaurant Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEN Restaurant Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 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 GEN Restaurant

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

The idea behind Chipotle Mexican Grill and GEN Restaurant Group, 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .