Correlation Between Hon Hai and Chipotle Mexican

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

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

Diversification Opportunities for Hon Hai and Chipotle Mexican

0.53

Correlation Coefficient

Hon Hai  Chipotle Mexican

Very weak diversification

The 3 months correlation between Hon and Chipotle is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision 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 Hon Hai 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 Hon Hai Precision 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 Hon Hai i.e., Hon Hai and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Hon Hai and Chipotle Mexican

Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.98 times more return on investment than Chipotle Mexican. However, Hon Hai is 1.98 times more volatile than Chipotle Mexican Grill. It trades about 0.16 of its potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.11 per unit of risk. If you would invest  654.00  in Hon Hai Precision on April 20, 2025 and sell it today you would earn a total of  291.00  from holding Hon Hai Precision or generate 44.5% return on investment over 90 days.

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

Hon Hai Precision  vs.  Chipotle Mexican Grill

Hon Hai Precision

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hon Hai Precision are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Hon Hai reported solid returns over the last few months and may actually be approaching a breakup point.

Chipotle Mexican Grill

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chipotle Mexican reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hon Hai and Chipotle Mexican

The main advantage of trading using opposite Hon Hai and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai 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 Hon Hai Precision 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.