Correlation Between OPERA SOFTWARE and Darden Restaurants

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

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

Diversification Opportunities for OPERA SOFTWARE and Darden Restaurants

-0.37

Correlation Coefficient

OPERA SOFTWARE  Darden Restaurants

Very good diversification

The 3 months correlation between OPERA and Darden is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding OPERA SOFTWARE and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and OPERA SOFTWARE 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 OPERA SOFTWARE are associated (or correlated) with Darden Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darden Restaurants has no effect on the direction of OPERA SOFTWARE i.e., OPERA SOFTWARE and Darden Restaurants go up and down completely randomly.

Pair Corralation between OPERA SOFTWARE and Darden Restaurants

Assuming the 90 days trading horizon OPERA SOFTWARE is expected to under-perform the Darden Restaurants. In addition to that, OPERA SOFTWARE is 1.61 times more volatile than Darden Restaurants. It trades about 0.0 of its total potential returns per unit of risk. Darden Restaurants is currently generating about 0.05 per unit of volatility. If you would invest  12,647  in Darden Restaurants on October 11, 2024 and sell it today you would earn a total of  4,963  from holding Darden Restaurants or generate 39.24% return on investment over 90 days.

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

OPERA SOFTWARE  vs.  Darden Restaurants

OPERA SOFTWARE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OPERA SOFTWARE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, OPERA SOFTWARE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Darden Restaurants

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 12 (%) 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.

Pair Trading with OPERA SOFTWARE and Darden Restaurants

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

The idea behind OPERA SOFTWARE and Darden Restaurants 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.