Correlation Between Chipotle Mexican and Brinker International

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

Diversification Opportunities for Chipotle Mexican and Brinker International

0.67

Correlation Coefficient

Chipotle Mexican  Brinker International

Poor diversification

The 3 months correlation between Chipotle and Brinker is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Brinker International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinker International 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 Brinker International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinker International has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Brinker International go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Brinker International

Considering the 90-day investment horizon Chipotle Mexican is expected to generate 5.6 times less return on investment than Brinker International. But when comparing it to its historical volatility, Chipotle Mexican Grill is 1.57 times less risky than Brinker International. It trades about 0.03 of its potential returns per unit of risk. Brinker International is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,954  in Brinker International on February 7, 2025 and sell it today you would earn a total of  9,934  from holding Brinker International or generate 251.24% return on investment over 90 days.

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

Chipotle Mexican Grill  vs.  Brinker International

Chipotle Mexican Grill

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chipotle Mexican Grill has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Brinker International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brinker International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Chipotle Mexican and Brinker International

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

The idea behind Chipotle Mexican Grill and Brinker International 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.