Correlation Between PICKN PAY and Darden Restaurants

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

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

Diversification Opportunities for PICKN PAY and Darden Restaurants

0.59

Correlation Coefficient

PICKN PAY  Darden Restaurants

Very weak diversification

The 3 months correlation between PICKN and Darden is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding PICKN PAY STORES and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and PICKN PAY 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 PICKN PAY STORES 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 PICKN PAY i.e., PICKN PAY and Darden Restaurants go up and down completely randomly.

Pair Corralation between PICKN PAY and Darden Restaurants

Assuming the 90 days trading horizon PICKN PAY STORES is expected to generate 1.84 times more return on investment than Darden Restaurants. However, PICKN PAY is 1.84 times more volatile than Darden Restaurants. It trades about 0.2 of its potential returns per unit of risk. Darden Restaurants is currently generating about 0.13 per unit of risk. If you would invest  111.00  in PICKN PAY STORES on September 12, 2024 and sell it today you would earn a total of  46.00  from holding PICKN PAY STORES or generate 41.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

PICKN PAY STORES  vs.  Darden Restaurants

PICKN PAY STORES

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PICKN PAY STORES are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PICKN PAY unveiled solid returns over the last few months and may actually be approaching a breakup point.

Darden Restaurants

Risk-Adjusted Performance

10 of 100

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. In spite of comparatively fragile basic indicators, Darden Restaurants unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PICKN PAY and Darden Restaurants

The main advantage of trading using opposite PICKN PAY and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PICKN PAY 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 PICKN PAY STORES 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.