Correlation Between Kodiak Gas and Chipotle Mexican

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

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

Diversification Opportunities for Kodiak Gas and Chipotle Mexican

0.3

Correlation Coefficient

Kodiak Gas  Chipotle Mexican

Weak diversification

The 3 months correlation between Kodiak and Chipotle is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Kodiak Gas Services, 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 Kodiak Gas 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 Kodiak Gas Services, 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 Kodiak Gas i.e., Kodiak Gas and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Kodiak Gas and Chipotle Mexican

Considering the 90-day investment horizon Kodiak Gas Services, is expected to generate 1.8 times more return on investment than Chipotle Mexican. However, Kodiak Gas is 1.8 times more volatile than Chipotle Mexican Grill. It trades about 0.45 of its potential returns per unit of risk. Chipotle Mexican Grill is currently generating about -0.33 per unit of risk. If you would invest  4,006  in Kodiak Gas Services, on October 22, 2024 and sell it today you would earn a total of  732.00  from holding Kodiak Gas Services, or generate 18.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Kodiak Gas Services,  vs.  Chipotle Mexican Grill

Kodiak Gas Services,

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kodiak Gas Services, are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Kodiak Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Chipotle Mexican Grill

Risk-Adjusted Performance

0 of 100

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 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 Kodiak Gas and Chipotle Mexican

The main advantage of trading using opposite Kodiak Gas and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kodiak Gas 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 Kodiak Gas Services, 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.