Correlation Between Chipotle Mexican and Constellation Brands

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

Diversification Opportunities for Chipotle Mexican and Constellation Brands

-0.24

Correlation Coefficient

Chipotle Mexican  Constellation Brands

Very good diversification

The 3 months correlation between Chipotle and Constellation is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Constellation Brands Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Brands 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 Constellation Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Brands has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Constellation Brands go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Constellation Brands

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to under-perform the Constellation Brands. In addition to that, Chipotle Mexican is 1.45 times more volatile than Constellation Brands Class. It trades about -0.09 of its total potential returns per unit of risk. Constellation Brands Class is currently generating about -0.1 per unit of volatility. If you would invest  18,635  in Constellation Brands Class on May 5, 2025 and sell it today you would lose (2,017) from holding Constellation Brands Class or give up 10.82% of portfolio value over 90 days.

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

Chipotle Mexican Grill  vs.  Constellation Brands Class

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 weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in September 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Constellation Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Constellation Brands Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Chipotle Mexican and Constellation Brands

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

The idea behind Chipotle Mexican Grill and Constellation Brands Class 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.

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 the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.