Correlation Between Chipotle Mexican and Darden Restaurants
Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Darden Restaurants 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 Darden Restaurants 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 Darden Restaurants, you can compare the effects of market volatilities on Chipotle Mexican and Darden Restaurants 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 Darden Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Darden Restaurants.
Diversification Opportunities for Chipotle Mexican and Darden Restaurants
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Chipotle and Darden is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants 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 Darden Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darden Restaurants has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Darden Restaurants go up and down completely randomly.
Pair Corralation between Chipotle Mexican and Darden Restaurants
Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 0.81 times more return on investment than Darden Restaurants. However, Chipotle Mexican Grill is 1.23 times less risky than Darden Restaurants. It trades about -0.04 of its potential returns per unit of risk. Darden Restaurants is currently generating about -0.13 per unit of risk. If you would invest 295,553 in Chipotle Mexican Grill on January 26, 2024 and sell it today you would lose (2,877) from holding Chipotle Mexican Grill or give up 0.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chipotle Mexican Grill vs. Darden Restaurants
Performance |
| Timeline |
| Chipotle Mexican Grill |
| Darden Restaurants |
Chipotle Mexican and Darden Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipotle Mexican and Darden Restaurants
The main advantage of trading using opposite Chipotle Mexican and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Darden Restaurants 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 Darden Restaurants will offset losses from the drop in Darden Restaurants' long position.| Chipotle Mexican vs. Starbucks | Chipotle Mexican vs. Dominos Pizza | Chipotle Mexican vs. Yum Brands | Chipotle Mexican vs. The Wendys Co |
| Darden Restaurants vs. Dine Brands Global | Darden Restaurants vs. Bloomin Brands | Darden Restaurants vs. BJs Restaurants | Darden Restaurants vs. The Cheesecake Factory |
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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.
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