Correlation Between Darden Restaurants and Aurora Investment

Can any of the company-specific risk be diversified away by investing in both Darden Restaurants and Aurora Investment 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 Darden Restaurants and Aurora Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Darden Restaurants and Aurora Investment Trust, you can compare the effects of market volatilities on Darden Restaurants and Aurora Investment 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 Darden Restaurants with a short position of Aurora Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Aurora Investment.

Diversification Opportunities for Darden Restaurants and Aurora Investment

-0.65

Correlation Coefficient

Darden Restaurants  Aurora Investment

Excellent diversification

The 3 months correlation between Darden and Aurora is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Aurora Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Investment Trust and Darden Restaurants 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 Darden Restaurants are associated (or correlated) with Aurora Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Investment Trust has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Aurora Investment go up and down completely randomly.

Pair Corralation between Darden Restaurants and Aurora Investment

Assuming the 90 days trading horizon Darden Restaurants is expected to generate 2.48 times more return on investment than Aurora Investment. However, Darden Restaurants is 2.48 times more volatile than Aurora Investment Trust. It trades about 0.21 of its potential returns per unit of risk. Aurora Investment Trust is currently generating about -0.03 per unit of risk. If you would invest  16,677  in Darden Restaurants on October 9, 2024 and sell it today you would earn a total of  2,033  from holding Darden Restaurants or generate 12.19% return on investment over 90 days.

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

Darden Restaurants  vs.  Aurora Investment Trust

Darden Restaurants

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Darden Restaurants unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aurora Investment Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Aurora Investment is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Darden Restaurants and Aurora Investment

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

The idea behind Darden Restaurants and Aurora Investment Trust 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.