Correlation Between Darden Restaurants and Mowi ASA

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

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

Diversification Opportunities for Darden Restaurants and Mowi ASA

0.67

Correlation Coefficient

Darden Restaurants  Mowi ASA

Poor diversification

The 3 months correlation between Darden and Mowi is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Mowi ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mowi ASA 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 Mowi ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mowi ASA has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Mowi ASA go up and down completely randomly.

Pair Corralation between Darden Restaurants and Mowi ASA

Assuming the 90 days trading horizon Darden Restaurants is expected to generate 2.71 times less return on investment than Mowi ASA. But when comparing it to its historical volatility, Darden Restaurants is 1.62 times less risky than Mowi ASA. It trades about 0.05 of its potential returns per unit of risk. Mowi ASA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  677.00  in Mowi ASA on October 5, 2024 and sell it today you would earn a total of  964.00  from holding Mowi ASA or generate 142.39% return on investment over 90 days.

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

Darden Restaurants  vs.  Mowi ASA

Darden Restaurants

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Darden Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, Darden Restaurants unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mowi ASA

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Mowi ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Mowi ASA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Darden Restaurants and Mowi ASA

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

The idea behind Darden Restaurants and Mowi ASA 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.