Correlation Between Public Storage and Darden Restaurants

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

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

Diversification Opportunities for Public Storage and Darden Restaurants

0.23

Correlation Coefficient

Public Storage  Darden Restaurants

Modest diversification

The 3 months correlation between Public and Darden is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Public Storage and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and Public Storage 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 Public Storage are associated (or correlated) with Darden Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darden Restaurants has no effect on the direction of Public Storage i.e., Public Storage and Darden Restaurants go up and down completely randomly.

Pair Corralation between Public Storage and Darden Restaurants

Assuming the 90 days trading horizon Public Storage is expected to generate 16.37 times less return on investment than Darden Restaurants. But when comparing it to its historical volatility, Public Storage is 1.34 times less risky than Darden Restaurants. It trades about 0.01 of its potential returns per unit of risk. Darden Restaurants is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  18,562  in Darden Restaurants on December 30, 2024 and sell it today you would earn a total of  1,920  from holding Darden Restaurants or generate 10.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.38%
Values	Daily Returns

Public Storage  vs.  Darden Restaurants

Public Storage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Public Storage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Public Storage is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Darden Restaurants

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Darden Restaurants may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Public Storage and Darden Restaurants

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

The idea behind Public Storage and Darden Restaurants 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.