Correlation Between Chipotle Mexican and Equity Lifestyle

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Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Equity Lifestyle 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 Equity Lifestyle 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 Equity Lifestyle Properties, you can compare the effects of market volatilities on Chipotle Mexican and Equity Lifestyle 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 Equity Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Equity Lifestyle.

Diversification Opportunities for Chipotle Mexican and Equity Lifestyle

0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between Chipotle and Equity is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Equity Lifestyle Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Lifestyle Pro 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 Equity Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Lifestyle Pro has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Equity Lifestyle go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Equity Lifestyle

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 1.08 times more return on investment than Equity Lifestyle. However, Chipotle Mexican is 1.08 times more volatile than Equity Lifestyle Properties. It trades about -0.18 of its potential returns per unit of risk. Equity Lifestyle Properties is currently generating about -0.28 per unit of risk. If you would invest  161,652  in Chipotle Mexican Grill on July 4, 2022 and sell it today you would lose (11,376)  from holding Chipotle Mexican Grill or give up 7.04% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Chipotle Mexican Grill  vs.  Equity Lifestyle Properties

 Performance (%) 
       Timeline  
Chipotle Mexican Grill 
Chipotle Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting primary indicators, Chipotle Mexican may actually be approaching a critical reversion point that can send shares even higher in November 2022.

Chipotle Price Channel

Equity Lifestyle Pro 
Equity Performance
0 of 100
Over the last 90 days Equity Lifestyle Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in November 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Equity Price Channel

Chipotle Mexican and Equity Lifestyle Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chipotle Mexican and Equity Lifestyle

The main advantage of trading using opposite Chipotle Mexican and Equity Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Equity Lifestyle 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 Equity Lifestyle will offset losses from the drop in Equity Lifestyle's long position.
Chipotle Mexican vs. Amazon Inc
The idea behind Chipotle Mexican Grill and Equity Lifestyle Properties 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.
Equity Lifestyle vs. Amazon Inc
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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