Correlation Between Darden Restaurants and Chipotle Mexican

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Darden Restaurants 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 Darden Restaurants and Chipotle Mexican into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darden Restaurants and Chipotle Mexican Grill, you can compare the effects of market volatilities on Darden Restaurants 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 Darden Restaurants with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Chipotle Mexican.

Diversification Opportunities for Darden Restaurants and Chipotle Mexican

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Darden and Chipotle is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants 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 Darden Restaurants 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 Darden Restaurants 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 Darden Restaurants i.e., Darden Restaurants and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Darden Restaurants and Chipotle Mexican

Considering the 90-day investment horizon Darden Restaurants is expected to under-perform the Chipotle Mexican. In addition to that, Darden Restaurants is 1.58 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 0.36 per unit of volatility. If you would invest  267,172  in Chipotle Mexican Grill on December 30, 2023 and sell it today you would earn a total of  23,505  from holding Chipotle Mexican Grill or generate 8.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Darden Restaurants  vs.  Chipotle Mexican Grill

 Performance 
       Timeline  
Darden Restaurants 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Darden Restaurants is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
Chipotle Mexican Grill 

Risk-Adjusted Performance

25 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, Chipotle Mexican reported solid returns over the last few months and may actually be approaching a breakup point.

Darden Restaurants and Chipotle Mexican Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Darden Restaurants and Chipotle Mexican

The main advantage of trading using opposite Darden Restaurants and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darden Restaurants 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 Darden Restaurants 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.
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

Other Complementary Tools

USA ETFs
Find actively traded Exchange Traded Funds (ETF) in USA
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Portfolio File Import
Quickly import all of your third-party portfolios from your local drive in csv format
Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
CEOs Directory
Screen CEOs from public companies around the world