Correlation Between Darden Restaurants and State Bank

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

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

Diversification Opportunities for Darden Restaurants and State Bank

-0.55

Correlation Coefficient

Darden Restaurants  State Bank

Excellent diversification

The 3 months correlation between Darden and State is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and State Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Bank 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 State Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Bank has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and State Bank go up and down completely randomly.

Pair Corralation between Darden Restaurants and State Bank

Assuming the 90 days trading horizon Darden Restaurants is expected to generate 0.97 times more return on investment than State Bank. However, Darden Restaurants is 1.03 times less risky than State Bank. It trades about -0.04 of its potential returns per unit of risk. State Bank of is currently generating about -0.17 per unit of risk. If you would invest  17,858  in Darden Restaurants on December 22, 2024 and sell it today you would lose (703.00) from holding Darden Restaurants or give up 3.94% of portfolio value over 90 days.

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

Darden Restaurants  vs.  State Bank of

Darden Restaurants

Risk-Adjusted Performance

Very Weak

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 stable basic indicators, Darden Restaurants is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

State Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Darden Restaurants and State Bank

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

The idea behind Darden Restaurants and State Bank of 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.