Correlation Between CARGOJET INC and Darden Restaurants

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

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

Diversification Opportunities for CARGOJET INC and Darden Restaurants

0.12

Correlation Coefficient

CARGOJET INC  Darden Restaurants

Average diversification

The 3 months correlation between CARGOJET and Darden is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding CARGOJET INC VAR and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and CARGOJET INC 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 CARGOJET INC VAR 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 CARGOJET INC i.e., CARGOJET INC and Darden Restaurants go up and down completely randomly.

Pair Corralation between CARGOJET INC and Darden Restaurants

Assuming the 90 days trading horizon CARGOJET INC VAR is expected to under-perform the Darden Restaurants. In addition to that, CARGOJET INC is 1.42 times more volatile than Darden Restaurants. It trades about -0.1 of its total potential returns per unit of risk. Darden Restaurants is currently generating about 0.06 per unit of volatility. If you would invest  17,992  in Darden Restaurants on December 27, 2024 and sell it today you would earn a total of  1,193  from holding Darden Restaurants or generate 6.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

CARGOJET INC VAR  vs.  Darden Restaurants

CARGOJET INC VAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days CARGOJET INC VAR 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

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly 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 CARGOJET INC and Darden Restaurants

The main advantage of trading using opposite CARGOJET INC and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARGOJET INC 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 CARGOJET INC VAR 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.