Correlation Between BLACK and Chipotle Mexican

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

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

Diversification Opportunities for BLACK and Chipotle Mexican

0.0

Correlation Coefficient

BLACK  Chipotle Mexican

Pay attention - limited upside

The 3 months correlation between BLACK and Chipotle is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BLACK HILLS P 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 BLACK 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 BLACK HILLS P 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 BLACK i.e., BLACK and Chipotle Mexican go up and down completely randomly.

Pair Corralation between BLACK and Chipotle Mexican

Assuming the 90 days trading horizon BLACK HILLS P is expected to under-perform the Chipotle Mexican. But the bond apears to be less risky and, when comparing its historical volatility, BLACK HILLS P is 2.56 times less risky than Chipotle Mexican. The bond trades about 0.0 of its potential returns per unit of risk. The Chipotle Mexican Grill is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,195  in Chipotle Mexican Grill on October 12, 2024 and sell it today you would earn a total of  2,597  from holding Chipotle Mexican Grill or generate 81.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	63.43%
Values	Daily Returns

BLACK HILLS P  vs.  Chipotle Mexican Grill

BLACK HILLS P

Risk-Adjusted Performance

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Very Weak

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

Chipotle Mexican Grill

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chipotle Mexican Grill has generated negative risk-adjusted returns adding no value to investors with long positions. 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 BLACK and Chipotle Mexican

The main advantage of trading using opposite BLACK and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BLACK 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 BLACK HILLS P 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.