Correlation Between Digital Bros and Darden Restaurants

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

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

Diversification Opportunities for Digital Bros and Darden Restaurants

0.74

Correlation Coefficient

Digital Bros  Darden Restaurants

Poor diversification

The 3 months correlation between Digital and Darden is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Digital Bros SpA and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and Digital Bros 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 Digital Bros SpA 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 Digital Bros i.e., Digital Bros and Darden Restaurants go up and down completely randomly.

Pair Corralation between Digital Bros and Darden Restaurants

Assuming the 90 days horizon Digital Bros SpA is expected to generate 0.74 times more return on investment than Darden Restaurants. However, Digital Bros SpA is 1.35 times less risky than Darden Restaurants. It trades about 0.54 of its potential returns per unit of risk. Darden Restaurants is currently generating about 0.16 per unit of risk. If you would invest  949.00  in Digital Bros SpA on October 9, 2024 and sell it today you would earn a total of  271.00  from holding Digital Bros SpA or generate 28.56% return on investment over 90 days.

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

Digital Bros SpA  vs.  Darden Restaurants

Digital Bros SpA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Bros SpA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Digital Bros reported solid returns over the last few months and may actually be approaching a breakup point.

Darden Restaurants

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 14 (%) 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 Digital Bros and Darden Restaurants

The main advantage of trading using opposite Digital Bros and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Bros 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 Digital Bros SpA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.