Correlation Between Darden Restaurants and Esfera Robotics

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

By analyzing existing cross correlation between Darden Restaurants and Esfera Robotics R, you can compare the effects of market volatilities on Darden Restaurants and Esfera Robotics 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 Esfera Robotics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Esfera Robotics.

Diversification Opportunities for Darden Restaurants and Esfera Robotics

0.8

Correlation Coefficient

Darden Restaurants  Esfera Robotics

Very poor diversification

The 3 months correlation between Darden and Esfera is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Esfera Robotics R in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esfera Robotics R 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 Esfera Robotics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esfera Robotics R has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Esfera Robotics go up and down completely randomly.

Pair Corralation between Darden Restaurants and Esfera Robotics

Assuming the 90 days trading horizon Darden Restaurants is expected to generate 1.99 times more return on investment than Esfera Robotics. However, Darden Restaurants is 1.99 times more volatile than Esfera Robotics R. It trades about 0.15 of its potential returns per unit of risk. Esfera Robotics R is currently generating about 0.2 per unit of risk. If you would invest  14,775  in Darden Restaurants on October 4, 2024 and sell it today you would earn a total of  3,085  from holding Darden Restaurants or generate 20.88% return on investment over 90 days.

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

Darden Restaurants  vs.  Esfera Robotics R

Darden Restaurants

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 11 (%) 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.

Esfera Robotics R

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Esfera Robotics R are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat fragile basic indicators, Esfera Robotics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Darden Restaurants and Esfera Robotics

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

The idea behind Darden Restaurants and Esfera Robotics R 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.