Correlation Between Doubledown Interactive and Chipotle Mexican

Can any of the company-specific risk be diversified away by investing in both Doubledown Interactive and Chipotle Mexican 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 Doubledown Interactive and Chipotle Mexican into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Doubledown Interactive Co and Chipotle Mexican Grill, you can compare the effects of market volatilities on Doubledown Interactive and Chipotle Mexican 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 Doubledown Interactive with a short position of Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of Doubledown Interactive and Chipotle Mexican.

Diversification Opportunities for Doubledown Interactive and Chipotle Mexican

0.49

Correlation Coefficient

Doubledown Interactive  Chipotle Mexican

Very weak diversification

The 3 months correlation between Doubledown and Chipotle is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Doubledown Interactive Co and Chipotle Mexican Grill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chipotle Mexican Grill and Doubledown Interactive 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 Doubledown Interactive Co are associated (or correlated) with Chipotle Mexican. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chipotle Mexican Grill has no effect on the direction of Doubledown Interactive i.e., Doubledown Interactive and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Doubledown Interactive and Chipotle Mexican

Considering the 90-day investment horizon Doubledown Interactive Co is expected to generate 1.68 times more return on investment than Chipotle Mexican. However, Doubledown Interactive is 1.68 times more volatile than Chipotle Mexican Grill. It trades about 0.06 of its potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.04 per unit of risk. If you would invest  1,260  in Doubledown Interactive Co on July 13, 2024 and sell it today you would earn a total of  144.00  from holding Doubledown Interactive Co or generate 11.43% return on investment over 90 days.

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

Doubledown Interactive Co  vs.  Chipotle Mexican Grill

Doubledown Interactive

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Doubledown Interactive Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting fundamental indicators, Doubledown Interactive demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Chipotle Mexican Grill

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Chipotle Mexican is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Doubledown Interactive and Chipotle Mexican

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

The idea behind Doubledown Interactive Co and Chipotle Mexican Grill 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 Transaction History module to view history of all your transactions and understand their impact on performance.