Correlation Between Texas Roadhouse and Chipotle Mexican

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

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

Diversification Opportunities for Texas Roadhouse and Chipotle Mexican

0.33

Correlation Coefficient

Texas Roadhouse  Chipotle Mexican

Weak diversification

The 3 months correlation between Texas and Chipotle is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Texas Roadhouse 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 Texas Roadhouse 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 Texas Roadhouse 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 Texas Roadhouse i.e., Texas Roadhouse and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Texas Roadhouse and Chipotle Mexican

Given the investment horizon of 90 days Texas Roadhouse is expected to generate 0.98 times more return on investment than Chipotle Mexican. However, Texas Roadhouse is 1.02 times less risky than Chipotle Mexican. It trades about -0.18 of its potential returns per unit of risk. Chipotle Mexican Grill is currently generating about -0.3 per unit of risk. If you would invest  19,181  in Texas Roadhouse on October 8, 2024 and sell it today you would lose (887.00) from holding Texas Roadhouse or give up 4.62% of portfolio value over 90 days.

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

Texas Roadhouse  vs.  Chipotle Mexican Grill

Texas Roadhouse

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Texas Roadhouse is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Chipotle Mexican Grill

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Texas Roadhouse and Chipotle Mexican

The main advantage of trading using opposite Texas Roadhouse and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Roadhouse 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 Texas Roadhouse 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..