Correlation Between Willamette Valley and Chipotle Mexican

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

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

Diversification Opportunities for Willamette Valley and Chipotle Mexican

-0.61

Correlation Coefficient

Willamette Valley  Chipotle Mexican

Excellent diversification

The 3 months correlation between Willamette and Chipotle is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards 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 Willamette Valley 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 Willamette Valley Vineyards 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 Willamette Valley i.e., Willamette Valley and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Willamette Valley and Chipotle Mexican

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Chipotle Mexican. But the stock apears to be less risky and, when comparing its historical volatility, Willamette Valley Vineyards is 1.54 times less risky than Chipotle Mexican. The stock trades about -0.06 of its potential returns per unit of risk. The Chipotle Mexican Grill is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,881  in Chipotle Mexican Grill on September 19, 2024 and sell it today you would earn a total of  253.00  from holding Chipotle Mexican Grill or generate 4.3% return on investment over 90 days.

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

Willamette Valley Vineyards  vs.  Chipotle Mexican Grill

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Chipotle Mexican Grill

Risk-Adjusted Performance

4 of 100

OK

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 Willamette Valley and Chipotle Mexican

The main advantage of trading using opposite Willamette Valley and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley 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 Willamette Valley Vineyards 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.