Correlation Between Cullen/Frost Bankers and Darden Restaurants

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

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

Diversification Opportunities for Cullen/Frost Bankers and Darden Restaurants

0.39

Correlation Coefficient

Cullen/Frost Bankers  Darden Restaurants

Weak diversification

The 3 months correlation between Cullen/Frost and Darden is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding CullenFrost Bankers and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and Cullen/Frost Bankers 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 CullenFrost Bankers 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 Cullen/Frost Bankers i.e., Cullen/Frost Bankers and Darden Restaurants go up and down completely randomly.

Pair Corralation between Cullen/Frost Bankers and Darden Restaurants

Assuming the 90 days horizon CullenFrost Bankers is expected to under-perform the Darden Restaurants. But the stock apears to be less risky and, when comparing its historical volatility, CullenFrost Bankers is 1.02 times less risky than Darden Restaurants. The stock trades about -0.15 of its potential returns per unit of risk. The Darden Restaurants is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  17,893  in Darden Restaurants on December 24, 2024 and sell it today you would earn a total of  317.00  from holding Darden Restaurants or generate 1.77% return on investment over 90 days.

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

CullenFrost Bankers  vs.  Darden Restaurants

Cullen/Frost Bankers

Risk-Adjusted Performance

Very Weak

Over the last 90 days CullenFrost Bankers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Darden Restaurants

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Darden Restaurants is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cullen/Frost Bankers and Darden Restaurants

The main advantage of trading using opposite Cullen/Frost Bankers and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cullen/Frost Bankers 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 CullenFrost Bankers 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.