Correlation Between Chipotle Mexican and Darden Restaurants

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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

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between Chipotle and Darden is -0.37. 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 1.68 times more return on investment than Darden Restaurants. However, Chipotle Mexican is 1.68 times more volatile than Darden Restaurants. It trades about 0.17 of its potential returns per unit of risk. Darden Restaurants is currently generating about 0.08 per unit of risk. If you would invest  139,637  in Chipotle Mexican Grill on September 8, 2022 and sell it today you would earn a total of  11,203  from holding Chipotle Mexican Grill or generate 8.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Chipotle Mexican Grill  vs.  Darden Restaurants

 Performance (%) 
       Timeline  
Chipotle Mexican Grill 
Chipotle Performance
0 of 100
Over the last 90 days Chipotle Mexican Grill has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Chipotle Price Channel

Darden Restaurants 
Darden Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Darden Restaurants may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Darden Price Channel

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. ATT Inc
Chipotle Mexican vs. Merck Company
Chipotle Mexican vs. The Travelers Companies
Chipotle Mexican vs. Bank Of America
The idea behind Chipotle Mexican Grill and Darden Restaurants 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.
Darden Restaurants vs. ATT Inc
Darden Restaurants vs. Merck Company
Darden Restaurants vs. The Travelers Companies
Darden Restaurants vs. Bank Of America
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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