Correlation Between Mesa Air and Chipotle Mexican

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

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

Diversification Opportunities for Mesa Air and Chipotle Mexican

0.04

Correlation Coefficient

Mesa Air  Chipotle Mexican

Significant diversification

The 3 months correlation between Mesa and Chipotle is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group 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 Mesa Air 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 Mesa Air Group 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 Mesa Air i.e., Mesa Air and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Mesa Air and Chipotle Mexican

Given the investment horizon of 90 days Mesa Air is expected to generate 2.64 times less return on investment than Chipotle Mexican. In addition to that, Mesa Air is 2.33 times more volatile than Chipotle Mexican Grill. It trades about 0.01 of its total potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.06 per unit of volatility. If you would invest  5,796  in Chipotle Mexican Grill on September 24, 2024 and sell it today you would earn a total of  391.00  from holding Chipotle Mexican Grill or generate 6.75% return on investment over 90 days.

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

Mesa Air Group  vs.  Chipotle Mexican Grill

Mesa Air Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mesa Air Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Mesa Air is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Chipotle Mexican Grill

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Chipotle Mexican may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mesa Air and Chipotle Mexican

The main advantage of trading using opposite Mesa Air and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mesa Air 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 Mesa Air Group 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.