Correlation Between National Vision and Chipotle Mexican

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

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

Diversification Opportunities for National Vision and Chipotle Mexican

0.42

Correlation Coefficient

National Vision  Chipotle Mexican

Very weak diversification

The 3 months correlation between National and Chipotle is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings 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 National Vision 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 National Vision Holdings 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 National Vision i.e., National Vision and Chipotle Mexican go up and down completely randomly.

Pair Corralation between National Vision and Chipotle Mexican

Considering the 90-day investment horizon National Vision Holdings is expected to generate 2.12 times more return on investment than Chipotle Mexican. However, National Vision is 2.12 times more volatile than Chipotle Mexican Grill. It trades about -0.08 of its potential returns per unit of risk. Chipotle Mexican Grill is currently generating about -0.3 per unit of risk. If you would invest  1,148  in National Vision Holdings on October 8, 2024 and sell it today you would lose (60.00) from holding National Vision Holdings or give up 5.23% of portfolio value over 90 days.

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

National Vision Holdings  vs.  Chipotle Mexican Grill

National Vision Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, National Vision may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Chipotle Mexican Grill

Risk-Adjusted Performance

2 of 100

Weak

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.

Pair Trading with National Vision and Chipotle Mexican

The main advantage of trading using opposite National Vision and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Vision 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 National Vision Holdings 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.