Correlation Between Chipotle Mexican and Liberty Resources

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

Diversification Opportunities for Chipotle Mexican and Liberty Resources

-0.43
  Correlation Coefficient

Very good diversification

The 3 months correlation between Chipotle and Liberty is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Liberty Resources Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Resources 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 Liberty Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Resources has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Liberty Resources go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Liberty Resources

If you would invest  5,798  in Chipotle Mexican Grill on October 8, 2024 and sell it today you would earn a total of  172.00  from holding Chipotle Mexican Grill or generate 2.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy1.61%
ValuesDaily Returns

Chipotle Mexican Grill  vs.  Liberty Resources Acquisition

 Performance 
       Timeline  
Chipotle Mexican Grill 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.
Liberty Resources 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Liberty Resources Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Liberty Resources is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chipotle Mexican and Liberty Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chipotle Mexican and Liberty Resources

The main advantage of trading using opposite Chipotle Mexican and Liberty Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Liberty Resources 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 Liberty Resources will offset losses from the drop in Liberty Resources' long position.
The idea behind Chipotle Mexican Grill and Liberty Resources Acquisition 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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