Correlation Between Darden Restaurants and Walmart
Can any of the company-specific risk be diversified away by investing in both Darden Restaurants and Walmart 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 Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darden Restaurants and Walmart, you can compare the effects of market volatilities on Darden Restaurants and Walmart 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 Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Walmart.
Diversification Opportunities for Darden Restaurants and Walmart
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Darden and Walmart is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Walmart go up and down completely randomly.
Pair Corralation between Darden Restaurants and Walmart
Assuming the 90 days trading horizon Darden Restaurants is expected to generate 10.02 times less return on investment than Walmart. But when comparing it to its historical volatility, Darden Restaurants is 9.84 times less risky than Walmart. It trades about 0.05 of its potential returns per unit of risk. Walmart is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,365 in Walmart on November 6, 2024 and sell it today you would earn a total of 1,595 from holding Walmart or generate 36.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.62% |
| Values | Daily Returns |
Darden Restaurants vs. Walmart
Performance |
| Timeline |
| Darden Restaurants |
| Walmart |
Darden Restaurants and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Darden Restaurants and Walmart
The main advantage of trading using opposite Darden Restaurants and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darden Restaurants position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.| Darden Restaurants vs. Scottish American Investment | Darden Restaurants vs. National Beverage Corp | Darden Restaurants vs. Tyson Foods Cl | Darden Restaurants vs. Kinnevik Investment AB |
| Walmart vs. Datalogic | Walmart vs. Verizon Communications | Walmart vs. Charter Communications Cl | Walmart vs. G5 Entertainment AB |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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