Correlation Between Chipotle Mexican and Carnival Plc

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

Diversification Opportunities for Chipotle Mexican and Carnival Plc

-0.35

Correlation Coefficient

Chipotle Mexican  Carnival Plc

Very good diversification

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

Pair Corralation between Chipotle Mexican and Carnival Plc

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 0.64 times more return on investment than Carnival Plc. However, Chipotle Mexican Grill is 1.56 times less risky than Carnival Plc. It trades about 0.29 of its potential returns per unit of risk. Carnival Plc ADS is currently generating about -0.05 per unit of risk. If you would invest  268,877  in Chipotle Mexican Grill on January 30, 2024 and sell it today you would earn a total of  49,820  from holding Chipotle Mexican Grill or generate 18.53% return on investment over 90 days.

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

Chipotle Mexican Grill  vs.  Carnival Plc ADS

Chipotle Mexican Grill

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 22 (%) 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.

Carnival Plc ADS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carnival Plc ADS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Chipotle Mexican and Carnival Plc

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

The idea behind Chipotle Mexican Grill and Carnival Plc ADS 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.