Correlation Between Constellium and Chipotle Mexican

Can any of the company-specific risk be diversified away by investing in both Constellium 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 Constellium and Chipotle Mexican into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Constellium Nv and Chipotle Mexican Grill, you can compare the effects of market volatilities on Constellium 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 Constellium with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellium and Chipotle Mexican.

Diversification Opportunities for Constellium and Chipotle Mexican

0.73

Correlation Coefficient

Constellium  Chipotle Mexican

Poor diversification

The 3 months correlation between Constellium and Chipotle is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Constellium Nv 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 Constellium 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 Constellium Nv 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 Constellium i.e., Constellium and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Constellium and Chipotle Mexican

Given the investment horizon of 90 days Constellium Nv is expected to under-perform the Chipotle Mexican. In addition to that, Constellium is 1.05 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 0.18 per unit of volatility. If you would invest  5,371  in Chipotle Mexican Grill on June 24, 2024 and sell it today you would earn a total of  352.00  from holding Chipotle Mexican Grill or generate 6.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Constellium Nv  vs.  Chipotle Mexican Grill

Constellium Nv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellium Nv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in October 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Chipotle Mexican Grill

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chipotle Mexican Grill has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Constellium and Chipotle Mexican

The main advantage of trading using opposite Constellium and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellium 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 Constellium Nv 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.