Correlation Between Chipotle Mexican and Unum

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

Diversification Opportunities for Chipotle Mexican and Unum

-0.03

Correlation Coefficient

Chipotle Mexican  Unum

Good diversification

The 3 months correlation between Chipotle and Unum is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Unum Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unum Group 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 Unum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unum Group has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Unum go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Unum

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 3.46 times more return on investment than Unum. However, Chipotle Mexican is 3.46 times more volatile than Unum Group. It trades about 0.09 of its potential returns per unit of risk. Unum Group is currently generating about 0.02 per unit of risk. If you would invest  5,711  in Chipotle Mexican Grill on September 4, 2024 and sell it today you would earn a total of  383.00  from holding Chipotle Mexican Grill or generate 6.71% return on investment over 90 days.

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

Chipotle Mexican Grill  vs.  Unum Group

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

Unum Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Unum Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Unum is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chipotle Mexican and Unum

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

The idea behind Chipotle Mexican Grill and Unum Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.