Correlation Between Biglari Holdings and Chipotle Mexican
Can any of the company-specific risk be diversified away by investing in both Biglari Holdings 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 Biglari Holdings and Chipotle Mexican into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biglari Holdings and Chipotle Mexican Grill, you can compare the effects of market volatilities on Biglari Holdings 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 Biglari Holdings with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biglari Holdings and Chipotle Mexican.
Diversification Opportunities for Biglari Holdings and Chipotle Mexican
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Biglari and Chipotle is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings 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 Biglari Holdings 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 Biglari Holdings 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 Biglari Holdings i.e., Biglari Holdings and Chipotle Mexican go up and down completely randomly.
Pair Corralation between Biglari Holdings and Chipotle Mexican
Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 2.05 times more return on investment than Chipotle Mexican. However, Biglari Holdings is 2.05 times more volatile than Chipotle Mexican Grill. It trades about 0.21 of its potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.28 per unit of risk. If you would invest 15,213 in Biglari Holdings on February 11, 2024 and sell it today you would earn a total of 5,987 from holding Biglari Holdings or generate 39.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biglari Holdings vs. Chipotle Mexican Grill
Performance |
| Timeline |
| Biglari Holdings |
| Chipotle Mexican Grill |
Biglari Holdings and Chipotle Mexican Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biglari Holdings and Chipotle Mexican
The main advantage of trading using opposite Biglari Holdings and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biglari Holdings 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.| Biglari Holdings vs. Cannae Holdings | Biglari Holdings vs. BJs Restaurants | Biglari Holdings vs. Ark Restaurants Corp | Biglari Holdings vs. Noble Romans |
| Chipotle Mexican vs. Starbucks | Chipotle Mexican vs. Dominos Pizza | Chipotle Mexican vs. Yum Brands | Chipotle Mexican vs. The Wendys Co |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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