Correlation Between Chipotle Mexican and ODP Corp

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

Diversification Opportunities for Chipotle Mexican and ODP Corp

0.49

Correlation Coefficient

Chipotle Mexican  ODP Corp

Very weak diversification

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

Pair Corralation between Chipotle Mexican and ODP Corp

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 0.42 times more return on investment than ODP Corp. However, Chipotle Mexican Grill is 2.38 times less risky than ODP Corp. It trades about 0.01 of its potential returns per unit of risk. ODP Corp is currently generating about -0.01 per unit of risk. If you would invest  5,121  in Chipotle Mexican Grill on February 22, 2025 and sell it today you would lose (43.00) from holding Chipotle Mexican Grill or give up 0.84% of portfolio value over 90 days.

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

Chipotle Mexican Grill  vs.  ODP Corp

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 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.

ODP Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ODP Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, ODP Corp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Chipotle Mexican and ODP Corp

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

The idea behind Chipotle Mexican Grill and ODP Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.