Correlation Between Chipotle Mexican and Lithium Americas

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

Diversification Opportunities for Chipotle Mexican and Lithium Americas

-0.38

Correlation Coefficient

Chipotle Mexican  Lithium Americas

Very good diversification

The 3 months correlation between Chipotle and Lithium is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas Corp 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 Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Lithium Americas go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Lithium Americas

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 0.45 times more return on investment than Lithium Americas. However, Chipotle Mexican Grill is 2.22 times less risky than Lithium Americas. It trades about -0.03 of its potential returns per unit of risk. Lithium Americas Corp is currently generating about -0.08 per unit of risk. If you would invest  5,927  in Chipotle Mexican Grill on October 11, 2024 and sell it today you would lose (135.00) from holding Chipotle Mexican Grill or give up 2.28% of portfolio value over 90 days.

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

Chipotle Mexican Grill  vs.  Lithium Americas Corp

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.

Lithium Americas Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lithium Americas Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Chipotle Mexican and Lithium Americas

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

The idea behind Chipotle Mexican Grill and Lithium Americas Corp 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.