Correlation Between Darden Restaurants and Flanigans Enterprises

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

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

Diversification Opportunities for Darden Restaurants and Flanigans Enterprises

-0.41

Correlation Coefficient

Darden Restaurants  Flanigans Enterprises

Very good diversification

The 3 months correlation between Darden and Flanigans is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Flanigans Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flanigans Enterprises 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 Flanigans Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flanigans Enterprises has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Flanigans Enterprises go up and down completely randomly.

Pair Corralation between Darden Restaurants and Flanigans Enterprises

Considering the 90-day investment horizon Darden Restaurants is expected to generate 2.97 times more return on investment than Flanigans Enterprises. However, Darden Restaurants is 2.97 times more volatile than Flanigans Enterprises. It trades about 0.16 of its potential returns per unit of risk. Flanigans Enterprises is currently generating about -0.03 per unit of risk. If you would invest  16,769  in Darden Restaurants on September 23, 2024 and sell it today you would earn a total of  1,990  from holding Darden Restaurants or generate 11.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Darden Restaurants  vs.  Flanigans Enterprises

Darden Restaurants

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Darden Restaurants may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Flanigans Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flanigans Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Darden Restaurants and Flanigans Enterprises

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

The idea behind Darden Restaurants and Flanigans Enterprises 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 CEOs Directory module to screen CEOs from public companies around the world.