Correlation Between Darden Restaurants and Xtrackers

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

By analyzing existing cross correlation between Darden Restaurants and Xtrackers SP 500, you can compare the effects of market volatilities on Darden Restaurants and Xtrackers 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 Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Xtrackers.

Diversification Opportunities for Darden Restaurants and Xtrackers

0.79

Correlation Coefficient

Darden Restaurants  Xtrackers

Poor diversification

The 3 months correlation between Darden and Xtrackers is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Xtrackers SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP 500 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 Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP 500 has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Xtrackers go up and down completely randomly.

Pair Corralation between Darden Restaurants and Xtrackers

Assuming the 90 days trading horizon Darden Restaurants is expected to generate 1.31 times less return on investment than Xtrackers. In addition to that, Darden Restaurants is 1.86 times more volatile than Xtrackers SP 500. It trades about 0.05 of its total potential returns per unit of risk. Xtrackers SP 500 is currently generating about 0.13 per unit of volatility. If you would invest  684.00  in Xtrackers SP 500 on October 4, 2024 and sell it today you would earn a total of  415.00  from holding Xtrackers SP 500 or generate 60.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Darden Restaurants  vs.  Xtrackers SP 500

Darden Restaurants

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 11 (%) 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.

Xtrackers SP 500

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers SP 500 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Xtrackers may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Darden Restaurants and Xtrackers

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

The idea behind Darden Restaurants and Xtrackers SP 500 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.