Correlation Between Darden Restaurants and Bt Brands

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Can any of the company-specific risk be diversified away by investing in both Darden Restaurants and Bt Brands 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 Bt Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darden Restaurants and Bt Brands, you can compare the effects of market volatilities on Darden Restaurants and Bt Brands 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 Bt Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Bt Brands.

Diversification Opportunities for Darden Restaurants and Bt Brands

-0.69
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Darden and BTBD is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Bt Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bt Brands 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 Bt Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bt Brands has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Bt Brands go up and down completely randomly.

Pair Corralation between Darden Restaurants and Bt Brands

Considering the 90-day investment horizon Darden Restaurants is expected to generate 0.27 times more return on investment than Bt Brands. However, Darden Restaurants is 3.7 times less risky than Bt Brands. It trades about 0.08 of its potential returns per unit of risk. Bt Brands is currently generating about 0.01 per unit of risk. If you would invest  12,960  in Darden Restaurants on October 6, 2024 and sell it today you would earn a total of  5,812  from holding Darden Restaurants or generate 44.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Darden Restaurants  vs.  Bt Brands

 Performance 
       Timeline  
Darden Restaurants 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Darden Restaurants demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Bt Brands 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Bt Brands are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Bt Brands is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Darden Restaurants and Bt Brands Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Darden Restaurants and Bt Brands

The main advantage of trading using opposite Darden Restaurants and Bt Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darden Restaurants position performs unexpectedly, Bt Brands 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 Bt Brands will offset losses from the drop in Bt Brands' long position.
The idea behind Darden Restaurants and Bt Brands 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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