Correlation Between AP Moeller and Darden Restaurants

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

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

Diversification Opportunities for AP Moeller and Darden Restaurants

0.59

Correlation Coefficient

AP Moeller  Darden Restaurants

Very weak diversification

The 3 months correlation between 0O77 and Darden is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding AP Moeller and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and AP Moeller 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 AP Moeller 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 AP Moeller i.e., AP Moeller and Darden Restaurants go up and down completely randomly.

Pair Corralation between AP Moeller and Darden Restaurants

Assuming the 90 days trading horizon AP Moeller is expected to generate 0.98 times more return on investment than Darden Restaurants. However, AP Moeller is 1.02 times less risky than Darden Restaurants. It trades about 0.16 of its potential returns per unit of risk. Darden Restaurants is currently generating about 0.09 per unit of risk. If you would invest  1,064,000  in AP Moeller on October 7, 2024 and sell it today you would earn a total of  178,500  from holding AP Moeller or generate 16.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.56%
Values	Daily Returns

AP Moeller   vs.  Darden Restaurants

AP Moeller

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AP Moeller are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, AP Moeller unveiled solid returns over the last few months and may actually be approaching a breakup point.

Darden Restaurants

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 9 (%) 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.

Pair Trading with AP Moeller and Darden Restaurants

The main advantage of trading using opposite AP Moeller and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AP Moeller 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 AP Moeller 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.