Correlation Between Manulife Financial and Chipotle Mexican

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Can any of the company-specific risk be diversified away by investing in both Manulife Financial 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 Manulife Financial and Chipotle Mexican into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Manulife Financial Corp and Chipotle Mexican Grill, you can compare the effects of market volatilities on Manulife Financial 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 Manulife Financial with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Financial and Chipotle Mexican.

Diversification Opportunities for Manulife Financial and Chipotle Mexican

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Manulife and Chipotle is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp 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 Manulife Financial 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 Manulife Financial Corp 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 Manulife Financial i.e., Manulife Financial and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Manulife Financial and Chipotle Mexican

Considering the 90-day investment horizon Manulife Financial Corp is expected to under-perform the Chipotle Mexican. But the stock apears to be less risky and, when comparing its historical volatility, Manulife Financial Corp is 1.11 times less risky than Chipotle Mexican. The stock trades about -0.14 of its potential returns per unit of risk. The Chipotle Mexican Grill is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  258,020  in Chipotle Mexican Grill on January 20, 2024 and sell it today you would earn a total of  28,891  from holding Chipotle Mexican Grill or generate 11.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Manulife Financial Corp  vs.  Chipotle Mexican Grill

 Performance 
       Timeline  
Manulife Financial Corp 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Manulife Financial may actually be approaching a critical reversion point that can send shares even higher in May 2024.
Chipotle Mexican Grill 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Chipotle Mexican reported solid returns over the last few months and may actually be approaching a breakup point.

Manulife Financial and Chipotle Mexican Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Manulife Financial and Chipotle Mexican

The main advantage of trading using opposite Manulife Financial and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Financial 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 Manulife Financial Corp 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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