Correlation Between National Beverage and Chipotle Mexican

Can any of the company-specific risk be diversified away by investing in both National Beverage 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 Beverage 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 Beverage Corp and Chipotle Mexican Grill, you can compare the effects of market volatilities on National Beverage 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 Beverage with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Chipotle Mexican.

Diversification Opportunities for National Beverage and Chipotle Mexican

0.36

Correlation Coefficient

National Beverage  Chipotle Mexican

Weak diversification

The 3 months correlation between National and Chipotle is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp 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 Beverage 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 Beverage Corp 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 Beverage i.e., National Beverage and Chipotle Mexican go up and down completely randomly.

Pair Corralation between National Beverage and Chipotle Mexican

Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the Chipotle Mexican. In addition to that, National Beverage is 1.25 times more volatile than Chipotle Mexican Grill. It trades about -0.03 of its total potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.26 per unit of volatility. If you would invest  5,881  in Chipotle Mexican Grill on September 18, 2024 and sell it today you would earn a total of  548.00  from holding Chipotle Mexican Grill or generate 9.32% return on investment over 90 days.

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

National Beverage Corp  vs.  Chipotle Mexican Grill

National Beverage Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, National Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chipotle Mexican Grill

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Chipotle Mexican reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and Chipotle Mexican

The main advantage of trading using opposite National Beverage and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage 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 Beverage Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.