Correlation Between Darden Restaurants and DFS Furniture

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

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

Diversification Opportunities for Darden Restaurants and DFS Furniture

-0.18

Correlation Coefficient

Darden Restaurants  DFS Furniture

Good diversification

The 3 months correlation between Darden and DFS is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and DFS Furniture PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DFS Furniture PLC 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 DFS Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DFS Furniture PLC has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and DFS Furniture go up and down completely randomly.

Pair Corralation between Darden Restaurants and DFS Furniture

Assuming the 90 days trading horizon Darden Restaurants is expected to generate 0.62 times more return on investment than DFS Furniture. However, Darden Restaurants is 1.61 times less risky than DFS Furniture. It trades about 0.08 of its potential returns per unit of risk. DFS Furniture PLC is currently generating about -0.08 per unit of risk. If you would invest  17,719  in Darden Restaurants on December 29, 2024 and sell it today you would earn a total of  1,481  from holding Darden Restaurants or generate 8.36% 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.  DFS Furniture PLC

Darden Restaurants

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Darden Restaurants may actually be approaching a critical reversion point that can send shares even higher in April 2025.

DFS Furniture PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days DFS Furniture PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Darden Restaurants and DFS Furniture

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

The idea behind Darden Restaurants and DFS Furniture PLC 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 Transaction History module to view history of all your transactions and understand their impact on performance.