Correlation Between Chipotle Mexican and Li-Cycle Holdings

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

Diversification Opportunities for Chipotle Mexican and Li-Cycle Holdings

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Chipotle and Li-Cycle is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Li-Cycle Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li-Cycle Holdings Corp 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 Li-Cycle Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li-Cycle Holdings Corp has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Li-Cycle Holdings go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Li-Cycle Holdings

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 0.46 times more return on investment than Li-Cycle Holdings. However, Chipotle Mexican Grill is 2.15 times less risky than Li-Cycle Holdings. It trades about -0.11 of its potential returns per unit of risk. Li-Cycle Holdings Corp is currently generating about -0.27 per unit of risk. If you would invest  162,786  in Chipotle Mexican Grill on June 27, 2022 and sell it today you would lose (7,034)  from holding Chipotle Mexican Grill or give up 4.32% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Chipotle Mexican Grill  vs.  Li-Cycle Holdings Corp

 Performance (%) 
       Timeline  
Chipotle Mexican Grill 
Chipotle Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Chipotle Mexican exhibited solid returns over the last few months and may actually be approaching a breakup point.

Chipotle Price Channel

Li-Cycle Holdings Corp 
Li-Cycle Performance
0 of 100
Over the last 90 days Li-Cycle Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in October 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Li-Cycle Price Channel

Chipotle Mexican and Li-Cycle Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chipotle Mexican and Li-Cycle Holdings

The main advantage of trading using opposite Chipotle Mexican and Li-Cycle Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Li-Cycle Holdings 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 Li-Cycle Holdings will offset losses from the drop in Li-Cycle Holdings' long position.
Chipotle Mexican vs. Industrias Bachoco SA
The idea behind Chipotle Mexican Grill and Li-Cycle Holdings Corp 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.
Li-Cycle Holdings vs. Sigma Lithium Corp
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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