Correlation Between Darden Restaurants and Prosiebensat

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

By analyzing existing cross correlation between Darden Restaurants and Prosiebensat 1 Media, you can compare the effects of market volatilities on Darden Restaurants and Prosiebensat 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 Prosiebensat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Prosiebensat.

Diversification Opportunities for Darden Restaurants and Prosiebensat

-0.73

Correlation Coefficient

Darden Restaurants  Prosiebensat

Pay attention - limited upside

The 3 months correlation between Darden and Prosiebensat is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Prosiebensat 1 Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosiebensat 1 Media 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 Prosiebensat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosiebensat 1 Media has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Prosiebensat go up and down completely randomly.

Pair Corralation between Darden Restaurants and Prosiebensat

Assuming the 90 days trading horizon Darden Restaurants is expected to generate 0.62 times more return on investment than Prosiebensat. However, Darden Restaurants is 1.6 times less risky than Prosiebensat. It trades about 0.11 of its potential returns per unit of risk. Prosiebensat 1 Media is currently generating about 0.04 per unit of risk. If you would invest  14,236  in Darden Restaurants on September 16, 2024 and sell it today you would earn a total of  1,559  from holding Darden Restaurants or generate 10.95% 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.  Prosiebensat 1 Media

Darden Restaurants

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 8 (%) 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 January 2025.

Prosiebensat 1 Media

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prosiebensat 1 Media are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Prosiebensat may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Darden Restaurants and Prosiebensat

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

The idea behind Darden Restaurants and Prosiebensat 1 Media 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.