Correlation Between Darden Restaurants and Live Nation
Can any of the company-specific risk be diversified away by investing in both Darden Restaurants and Live Nation 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 Live Nation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darden Restaurants and Live Nation Entertainment, you can compare the effects of market volatilities on Darden Restaurants and Live Nation 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 Live Nation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Live Nation.
Diversification Opportunities for Darden Restaurants and Live Nation
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Darden and Live is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Live Nation Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Nation Entertainment 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 Live Nation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Nation Entertainment has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Live Nation go up and down completely randomly.
Pair Corralation between Darden Restaurants and Live Nation
Assuming the 90 days trading horizon Darden Restaurants is expected to generate 2.18 times less return on investment than Live Nation. But when comparing it to its historical volatility, Darden Restaurants is 1.45 times less risky than Live Nation. It trades about 0.05 of its potential returns per unit of risk. Live Nation Entertainment is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 7,416 in Live Nation Entertainment on September 3, 2024 and sell it today you would earn a total of 6,436 from holding Live Nation Entertainment or generate 86.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 93.36% |
| Values | Daily Returns |
Darden Restaurants vs. Live Nation Entertainment
Performance |
| Timeline |
| Darden Restaurants |
| Live Nation Entertainment |
Darden Restaurants and Live Nation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Darden Restaurants and Live Nation
The main advantage of trading using opposite Darden Restaurants and Live Nation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darden Restaurants position performs unexpectedly, Live Nation 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 Live Nation will offset losses from the drop in Live Nation's long position.| Darden Restaurants vs. Catalyst Media Group | Darden Restaurants vs. CATLIN GROUP | Darden Restaurants vs. Magnora ASA | Darden Restaurants vs. RTW Venture Fund |
| Live Nation vs. Darden Restaurants | Live Nation vs. Universal Display Corp | Live Nation vs. Spirent Communications plc | Live Nation vs. Various Eateries PLC |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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