Correlation Between Chipotle Mexican and Brinker International
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Brinker International 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 Chipotle Mexican and Brinker International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chipotle Mexican Grill and Brinker International, you can compare the effects of market volatilities on Chipotle Mexican and Brinker International 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 Chipotle Mexican with a short position of Brinker International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Brinker International.
Diversification Opportunities for Chipotle Mexican and Brinker International
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chipotle and Brinker is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Brinker International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinker International and Chipotle Mexican 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 Chipotle Mexican Grill are associated (or correlated) with Brinker International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinker International has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Brinker International go up and down completely randomly.
Pair Corralation between Chipotle Mexican and Brinker International
Considering the 90-day investment horizon Chipotle Mexican is expected to generate 4.35 times less return on investment than Brinker International. But when comparing it to its historical volatility, Chipotle Mexican Grill is 2.59 times less risky than Brinker International. It trades about 0.04 of its potential returns per unit of risk. Brinker International is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,608 in Brinker International on January 25, 2024 and sell it today you would earn a total of 151.00 from holding Brinker International or generate 3.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chipotle Mexican Grill vs. Brinker International
Performance |
| Timeline |
| Chipotle Mexican Grill |
| Brinker International |
Chipotle Mexican and Brinker International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and Brinker International
The main advantage of trading using opposite Chipotle Mexican and Brinker International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Brinker International 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 Brinker International will offset losses from the drop in Brinker International's long position.| Chipotle Mexican vs. Starbucks | Chipotle Mexican vs. Dominos Pizza | Chipotle Mexican vs. Yum Brands | Chipotle Mexican vs. The Wendys Co |
| Brinker International vs. Dennys Corp | Brinker International vs. Bloomin Brands | Brinker International vs. Chuys Holdings | Brinker International vs. Jack In The |
Check out your portfolio center.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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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