Correlation Between Chipotle Mexican and Dutch Bros

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

Diversification Opportunities for Chipotle Mexican and Dutch Bros

0.41

Correlation Coefficient

Chipotle Mexican  Dutch Bros

Very weak diversification

The 3 months correlation between Chipotle and Dutch is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Dutch Bros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dutch Bros 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 Dutch Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dutch Bros has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Dutch Bros go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Dutch Bros

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 0.63 times more return on investment than Dutch Bros. However, Chipotle Mexican Grill is 1.58 times less risky than Dutch Bros. It trades about 0.24 of its potential returns per unit of risk. Dutch Bros is currently generating about -0.12 per unit of risk. If you would invest  272,030  in Chipotle Mexican Grill on February 3, 2024 and sell it today you would earn a total of  42,169  from holding Chipotle Mexican Grill or generate 15.5% return on investment over 90 days.

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

Chipotle Mexican Grill  vs.  Dutch Bros

Chipotle Mexican Grill

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 19 (%) 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.

Dutch Bros

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dutch Bros are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Dutch Bros is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Chipotle Mexican and Dutch Bros

The main advantage of trading using opposite Chipotle Mexican and Dutch Bros positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Dutch Bros 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 Dutch Bros will offset losses from the drop in Dutch Bros' long position.

The idea behind Chipotle Mexican Grill and Dutch Bros 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .