Correlation Between GAMING FAC and Darden Restaurants

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

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

Diversification Opportunities for GAMING FAC and Darden Restaurants

0.48

Correlation Coefficient

GAMING FAC  Darden Restaurants

Very weak diversification

The 3 months correlation between GAMING and Darden is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding GAMING FAC SA and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and GAMING FAC 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 GAMING FAC SA 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 GAMING FAC i.e., GAMING FAC and Darden Restaurants go up and down completely randomly.

Pair Corralation between GAMING FAC and Darden Restaurants

Assuming the 90 days horizon GAMING FAC SA is expected to generate 2.82 times more return on investment than Darden Restaurants. However, GAMING FAC is 2.82 times more volatile than Darden Restaurants. It trades about 0.09 of its potential returns per unit of risk. Darden Restaurants is currently generating about -0.04 per unit of risk. If you would invest  155.00  in GAMING FAC SA on December 22, 2024 and sell it today you would earn a total of  30.00  from holding GAMING FAC SA or generate 19.35% return on investment over 90 days.

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

GAMING FAC SA  vs.  Darden Restaurants

GAMING FAC SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GAMING FAC SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GAMING FAC reported solid returns over the last few months and may actually be approaching a breakup point.

Darden Restaurants

Risk-Adjusted Performance

Very Weak

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

Pair Trading with GAMING FAC and Darden Restaurants

The main advantage of trading using opposite GAMING FAC and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GAMING FAC 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 GAMING FAC SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.