Correlation Between El Pollo and Chuys Holdings

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Can any of the company-specific risk be diversified away by investing in both El Pollo and Chuys Holdings 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 El Pollo and Chuys Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between El Pollo Loco and Chuys Holdings, you can compare the effects of market volatilities on El Pollo and Chuys Holdings 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 El Pollo with a short position of Chuys Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Pollo and Chuys Holdings.

Diversification Opportunities for El Pollo and Chuys Holdings

-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between LOCO and Chuys is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding El Pollo Loco and Chuys Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chuys Holdings and El Pollo 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 El Pollo Loco are associated (or correlated) with Chuys Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chuys Holdings has no effect on the direction of El Pollo i.e., El Pollo and Chuys Holdings go up and down completely randomly.

Pair Corralation between El Pollo and Chuys Holdings

Given the investment horizon of 90 days El Pollo Loco is expected to under-perform the Chuys Holdings. In addition to that, El Pollo is 33.58 times more volatile than Chuys Holdings. It trades about -0.07 of its total potential returns per unit of risk. Chuys Holdings is currently generating about 0.39 per unit of volatility. If you would invest  3,732  in Chuys Holdings on September 13, 2024 and sell it today you would earn a total of  16.00  from holding Chuys Holdings or generate 0.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy32.81%
ValuesDaily Returns

El Pollo Loco  vs.  Chuys Holdings

 Performance 
       Timeline  
El Pollo Loco 

Risk-Adjusted Performance

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Strong
Very Weak
Over the last 90 days El Pollo Loco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
Chuys Holdings 

Risk-Adjusted Performance

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Weak
 
Strong
Strong
Over the last 90 days Chuys Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chuys Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

El Pollo and Chuys Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with El Pollo and Chuys Holdings

The main advantage of trading using opposite El Pollo and Chuys Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Pollo position performs unexpectedly, Chuys Holdings 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 Chuys Holdings will offset losses from the drop in Chuys Holdings' long position.
The idea behind El Pollo Loco and Chuys Holdings 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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