Correlation Between Restaurant Brands and Chipotle Mexican
Can any of the company-specific risk be diversified away by investing in both Restaurant Brands 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 Restaurant Brands and Chipotle Mexican into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Restaurant Brands International and Chipotle Mexican Grill, you can compare the effects of market volatilities on Restaurant Brands 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 Restaurant Brands with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of Restaurant Brands and Chipotle Mexican.
Diversification Opportunities for Restaurant Brands and Chipotle Mexican
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Restaurant and Chipotle is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa 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 Restaurant Brands 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 Restaurant Brands International 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 Restaurant Brands i.e., Restaurant Brands and Chipotle Mexican go up and down completely randomly.
Pair Corralation between Restaurant Brands and Chipotle Mexican
Considering the 90-day investment horizon Restaurant Brands International is expected to under-perform the Chipotle Mexican. But the stock apears to be less risky and, when comparing its historical volatility, Restaurant Brands International is 1.04 times less risky than Chipotle Mexican. The stock trades about -0.03 of its potential returns per unit of risk. The Chipotle Mexican Grill is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 292,696 in Chipotle Mexican Grill on February 9, 2024 and sell it today you would earn a total of 25,629 from holding Chipotle Mexican Grill or generate 8.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Restaurant Brands Internationa vs. Chipotle Mexican Grill
Performance |
| Timeline |
| Restaurant Brands |
| Chipotle Mexican Grill |
Restaurant Brands and Chipotle Mexican Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Restaurant Brands and Chipotle Mexican
The main advantage of trading using opposite Restaurant Brands and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant Brands 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.| Restaurant Brands vs. Angel Oak Financial | Restaurant Brands vs. iShares Aaa | Restaurant Brands vs. Gladstone Commercial | Restaurant Brands vs. Allianzgi Convertible Income |
| Chipotle Mexican vs. Angel Oak Financial | Chipotle Mexican vs. iShares Aaa | Chipotle Mexican vs. Gladstone Commercial | Chipotle Mexican vs. Allianzgi Convertible Income |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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