Correlation Between Darden Restaurants and Corticeira Amorim

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

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

Diversification Opportunities for Darden Restaurants and Corticeira Amorim

-0.71

Correlation Coefficient

Darden Restaurants  Corticeira Amorim

Pay attention - limited upside

The 3 months correlation between Darden and Corticeira is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Corticeira Amorim SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corticeira Amorim SGPS 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 Corticeira Amorim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corticeira Amorim SGPS has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Corticeira Amorim go up and down completely randomly.

Pair Corralation between Darden Restaurants and Corticeira Amorim

Assuming the 90 days trading horizon Darden Restaurants is expected to generate 1.63 times more return on investment than Corticeira Amorim. However, Darden Restaurants is 1.63 times more volatile than Corticeira Amorim SGPS. It trades about 0.15 of its potential returns per unit of risk. Corticeira Amorim SGPS is currently generating about -0.13 per unit of risk. If you would invest  14,176  in Darden Restaurants on September 4, 2024 and sell it today you would earn a total of  2,269  from holding Darden Restaurants or generate 16.01% return on investment over 90 days.

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

Darden Restaurants  vs.  Corticeira Amorim SGPS

Darden Restaurants

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 12 (%) 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.

Corticeira Amorim SGPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Corticeira Amorim SGPS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Darden Restaurants and Corticeira Amorim

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

The idea behind Darden Restaurants and Corticeira Amorim SGPS 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.