Correlation Between Chipotle Mexican and Highway Holdings

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

Diversification Opportunities for Chipotle Mexican and Highway Holdings

0.16

Correlation Coefficient

Chipotle Mexican  Highway Holdings

Average diversification

The 3 months correlation between Chipotle and Highway is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway Holdings 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 Highway Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highway Holdings has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Highway Holdings go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Highway Holdings

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 0.61 times more return on investment than Highway Holdings. However, Chipotle Mexican Grill is 1.63 times less risky than Highway Holdings. It trades about 0.11 of its potential returns per unit of risk. Highway Holdings Limited is currently generating about 0.01 per unit of risk. If you would invest  2,757  in Chipotle Mexican Grill on September 18, 2024 and sell it today you would earn a total of  3,720  from holding Chipotle Mexican Grill or generate 134.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Chipotle Mexican Grill  vs.  Highway Holdings Limited

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. Despite nearly weak primary indicators, Chipotle Mexican reported solid returns over the last few months and may actually be approaching a breakup point.

Highway Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Highway Holdings Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Highway Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chipotle Mexican and Highway Holdings

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

The idea behind Chipotle Mexican Grill and Highway Holdings Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.