Correlation Between CMR SAB and Chipotle Mexican

Can any of the company-specific risk be diversified away by investing in both CMR SAB and Chipotle Mexican 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 CMR SAB and Chipotle Mexican into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CMR SAB de and Chipotle Mexican Grill, you can compare the effects of market volatilities on CMR SAB and Chipotle Mexican 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 CMR SAB with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMR SAB and Chipotle Mexican.

Diversification Opportunities for CMR SAB and Chipotle Mexican

0.04

Correlation Coefficient

CMR SAB  Chipotle Mexican

Significant diversification

The 3 months correlation between CMR and Chipotle is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding CMR SAB de and Chipotle Mexican Grill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chipotle Mexican Grill and CMR SAB 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 CMR SAB de are associated (or correlated) with Chipotle Mexican. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chipotle Mexican Grill has no effect on the direction of CMR SAB i.e., CMR SAB and Chipotle Mexican go up and down completely randomly.

Pair Corralation between CMR SAB and Chipotle Mexican

Assuming the 90 days trading horizon CMR SAB de is expected to under-perform the Chipotle Mexican. In addition to that, CMR SAB is 1.86 times more volatile than Chipotle Mexican Grill. It trades about -0.1 of its total potential returns per unit of risk. Chipotle Mexican Grill is currently generating about -0.14 per unit of volatility. If you would invest  123,200  in Chipotle Mexican Grill on December 29, 2024 and sell it today you would lose (22,155) from holding Chipotle Mexican Grill or give up 17.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

CMR SAB de  vs.  Chipotle Mexican Grill

CMR SAB de

Risk-Adjusted Performance

Very Weak

Over the last 90 days CMR SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CMR SAB and Chipotle Mexican

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

The idea behind CMR SAB de and Chipotle Mexican Grill 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.