Correlation Between United Homes and Chipotle Mexican

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

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

Diversification Opportunities for United Homes and Chipotle Mexican

-0.29

Correlation Coefficient

United Homes  Chipotle Mexican

Very good diversification

The 3 months correlation between United and Chipotle is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding United Homes 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 United Homes 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 United Homes 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 United Homes i.e., United Homes and Chipotle Mexican go up and down completely randomly.

Pair Corralation between United Homes and Chipotle Mexican

Considering the 90-day investment horizon United Homes Group is expected to under-perform the Chipotle Mexican. In addition to that, United Homes is 2.47 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

United Homes Group  vs.  Chipotle Mexican Grill

United Homes Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Homes Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 United Homes and Chipotle Mexican

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

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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 Transaction History module to view history of all your transactions and understand their impact on performance.