Correlation Between Chipotle Mexican and Kenvue

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

Diversification Opportunities for Chipotle Mexican and Kenvue

0.29

Correlation Coefficient

Chipotle Mexican  Kenvue

Modest diversification

The 3 months correlation between Chipotle and Kenvue is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Kenvue Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenvue Inc 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 Kenvue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenvue Inc has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Kenvue go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Kenvue

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to under-perform the Kenvue. In addition to that, Chipotle Mexican is 1.45 times more volatile than Kenvue Inc. It trades about -0.42 of its total potential returns per unit of risk. Kenvue Inc is currently generating about -0.24 per unit of volatility. If you would invest  2,159  in Kenvue Inc on October 24, 2024 and sell it today you would lose (78.50) from holding Kenvue Inc or give up 3.64% of portfolio value over 90 days.

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

Chipotle Mexican Grill  vs.  Kenvue Inc

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.

Kenvue Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kenvue Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Chipotle Mexican and Kenvue

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

The idea behind Chipotle Mexican Grill and Kenvue Inc 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..