Correlation Between Darden Restaurants, and Waste Management

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

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

Diversification Opportunities for Darden Restaurants, and Waste Management

-0.13

Correlation Coefficient

Darden Restaurants,  Waste Management

Good diversification

The 3 months correlation between Darden and Waste is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants, and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and Darden Restaurants, 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 Darden Restaurants, are associated (or correlated) with Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Darden Restaurants, i.e., Darden Restaurants, and Waste Management go up and down completely randomly.

Pair Corralation between Darden Restaurants, and Waste Management

Assuming the 90 days trading horizon Darden Restaurants, is expected to generate 1.84 times more return on investment than Waste Management. However, Darden Restaurants, is 1.84 times more volatile than Waste Management. It trades about 0.13 of its potential returns per unit of risk. Waste Management is currently generating about 0.09 per unit of risk. If you would invest  23,294  in Darden Restaurants, on October 23, 2024 and sell it today you would earn a total of  4,660  from holding Darden Restaurants, or generate 20.01% return on investment over 90 days.

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

Darden Restaurants,  vs.  Waste Management

Darden Restaurants,

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants, are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Darden Restaurants, sustained solid returns over the last few months and may actually be approaching a breakup point.

Waste Management

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Waste Management may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Darden Restaurants, and Waste Management

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

The idea behind Darden Restaurants, and Waste Management 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.