Correlation Between Chipotle Mexican and Reborn Coffee

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

Diversification Opportunities for Chipotle Mexican and Reborn Coffee

-0.69

Correlation Coefficient

Chipotle Mexican  Reborn Coffee

Excellent diversification

The 3 months correlation between Chipotle and Reborn is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Reborn Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reborn Coffee 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 Reborn Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reborn Coffee has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Reborn Coffee go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Reborn Coffee

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to under-perform the Reborn Coffee. But the stock apears to be less risky and, when comparing its historical volatility, Chipotle Mexican Grill is 8.66 times less risky than Reborn Coffee. The stock trades about -0.21 of its potential returns per unit of risk. The Reborn Coffee is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  140.00  in Reborn Coffee on December 21, 2024 and sell it today you would earn a total of  334.00  from holding Reborn Coffee or generate 238.57% return on investment over 90 days.

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

Chipotle Mexican Grill  vs.  Reborn Coffee

Chipotle Mexican Grill

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Reborn Coffee

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Reborn Coffee are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Reborn Coffee displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chipotle Mexican and Reborn Coffee

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

The idea behind Chipotle Mexican Grill and Reborn Coffee 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.