Correlation Between Darden Restaurants and Kroger
Can any of the company-specific risk be diversified away by investing in both Darden Restaurants and Kroger 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 Kroger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darden Restaurants and Kroger Co, you can compare the effects of market volatilities on Darden Restaurants and Kroger 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 Kroger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Kroger.
Diversification Opportunities for Darden Restaurants and Kroger
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Darden and Kroger is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Kroger Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger 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 Kroger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kroger has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Kroger go up and down completely randomly.
Pair Corralation between Darden Restaurants and Kroger
Assuming the 90 days trading horizon Darden Restaurants is expected to generate 1.59 times more return on investment than Kroger. However, Darden Restaurants is 1.59 times more volatile than Kroger Co. It trades about 0.1 of its potential returns per unit of risk. Kroger Co is currently generating about 0.14 per unit of risk. If you would invest 16,490 in Darden Restaurants on August 28, 2024 and sell it today you would earn a total of 1,226 from holding Darden Restaurants or generate 7.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Darden Restaurants vs. Kroger Co
Performance |
| Timeline |
| Darden Restaurants |
| Kroger |
Darden Restaurants and Kroger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Darden Restaurants and Kroger
The main advantage of trading using opposite Darden Restaurants and Kroger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darden Restaurants position performs unexpectedly, Kroger 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 Kroger will offset losses from the drop in Kroger's long position.| Darden Restaurants vs. Microchip Technology | Darden Restaurants vs. Air Products Chemicals | Darden Restaurants vs. Supermarket Income REIT | Darden Restaurants vs. Blackstone Loan Financing |
| Kroger vs. AMG Advanced Metallurgical | Kroger vs. JD Sports Fashion | Kroger vs. Various Eateries PLC | Kroger vs. Darden Restaurants |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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