Correlation Between Chipotle Mexican and BECTON

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

Diversification Opportunities for Chipotle Mexican and BECTON

0.2

Correlation Coefficient

Chipotle Mexican  BECTON

Modest diversification

The 3 months correlation between Chipotle and BECTON is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and BECTON DICKINSON AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BECTON DICKINSON AND 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 BECTON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BECTON DICKINSON AND has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and BECTON go up and down completely randomly.

Pair Corralation between Chipotle Mexican and BECTON

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to under-perform the BECTON. In addition to that, Chipotle Mexican is 5.97 times more volatile than BECTON DICKINSON AND. It trades about -0.1 of its total potential returns per unit of risk. BECTON DICKINSON AND is currently generating about 0.02 per unit of volatility. If you would invest  9,071  in BECTON DICKINSON AND on December 2, 2024 and sell it today you would earn a total of  36.00  from holding BECTON DICKINSON AND or generate 0.4% return on investment over 90 days.

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

Chipotle Mexican Grill  vs.  BECTON DICKINSON AND

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 latest weak performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BECTON DICKINSON AND

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BECTON DICKINSON AND are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BECTON 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 BECTON

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

The idea behind Chipotle Mexican Grill and BECTON DICKINSON AND 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.