Correlation Between Fair Isaac and Chipotle Mexican

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

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

Diversification Opportunities for Fair Isaac and Chipotle Mexican

0.92

Correlation Coefficient

Fair Isaac  Chipotle Mexican

Almost no diversification

The 3 months correlation between Fair and Chipotle is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fair Isaac 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 Fair Isaac 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 Fair Isaac 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 Fair Isaac i.e., Fair Isaac and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Fair Isaac and Chipotle Mexican

Assuming the 90 days trading horizon Fair Isaac Corp is expected to generate 1.2 times more return on investment than Chipotle Mexican. However, Fair Isaac is 1.2 times more volatile than Chipotle Mexican Grill. It trades about 0.28 of its potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.17 per unit of risk. If you would invest  157,700  in Fair Isaac Corp on September 3, 2024 and sell it today you would earn a total of  69,300  from holding Fair Isaac Corp or generate 43.94% return on investment over 90 days.

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

Fair Isaac Corp  vs.  Chipotle Mexican Grill

Fair Isaac Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fair Isaac unveiled solid returns over the last few months and may actually be approaching a breakup point.

Chipotle Mexican Grill

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Chipotle Mexican reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fair Isaac and Chipotle Mexican

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

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.