Correlation Between Q2 Holdings and Chipotle Mexican

Can any of the company-specific risk be diversified away by investing in both Q2 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 Q2 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 Q2 Holdings and Chipotle Mexican Grill, you can compare the effects of market volatilities on Q2 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 Q2 Holdings with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of Q2 Holdings and Chipotle Mexican.

Diversification Opportunities for Q2 Holdings and Chipotle Mexican

0.76

Correlation Coefficient

Q2 Holdings  Chipotle Mexican

Poor diversification

The 3 months correlation between QTWO and Chipotle is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Q2 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 Q2 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 Q2 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 Q2 Holdings i.e., Q2 Holdings and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Q2 Holdings and Chipotle Mexican

Given the investment horizon of 90 days Q2 Holdings is expected to under-perform the Chipotle Mexican. But the stock apears to be less risky and, when comparing its historical volatility, Q2 Holdings is 1.15 times less risky than Chipotle Mexican. The stock trades about -0.07 of its potential returns per unit of risk. The Chipotle Mexican Grill is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  6,200  in Chipotle Mexican Grill on September 24, 2024 and sell it today you would lose (13.00) from holding Chipotle Mexican Grill or give up 0.21% of portfolio value over 90 days.

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

Q2 Holdings  vs.  Chipotle Mexican Grill

Q2 Holdings

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Q2 Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Q2 Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Q2 Holdings and Chipotle Mexican

The main advantage of trading using opposite Q2 Holdings and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Q2 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 Q2 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.