Correlation Between Loar Holdings and Chipotle Mexican

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

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

Diversification Opportunities for Loar Holdings and Chipotle Mexican

0.52

Correlation Coefficient

Loar Holdings  Chipotle Mexican

Very weak diversification

The 3 months correlation between Loar and Chipotle is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Loar 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 Loar Holdings 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 Loar 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 Loar Holdings i.e., Loar Holdings and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Loar Holdings and Chipotle Mexican

Given the investment horizon of 90 days Loar Holdings is expected to generate 1.56 times less return on investment than Chipotle Mexican. In addition to that, Loar Holdings is 1.58 times more volatile than Chipotle Mexican Grill. It trades about 0.04 of its total potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.1 per unit of volatility. If you would invest  5,766  in Chipotle Mexican Grill on September 14, 2024 and sell it today you would earn a total of  695.00  from holding Chipotle Mexican Grill or generate 12.05% return on investment over 90 days.

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

Loar Holdings  vs.  Chipotle Mexican Grill

Loar Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Loar Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Loar Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 unfluctuating primary indicators, Chipotle Mexican may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Loar Holdings and Chipotle Mexican

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

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.