Correlation Between Darden Restaurants and Scandic Hotels
Can any of the company-specific risk be diversified away by investing in both Darden Restaurants and Scandic Hotels 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 Scandic Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darden Restaurants and Scandic Hotels Group, you can compare the effects of market volatilities on Darden Restaurants and Scandic Hotels 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 Scandic Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Scandic Hotels.
Diversification Opportunities for Darden Restaurants and Scandic Hotels
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Darden and Scandic is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Scandic Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandic Hotels Group 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 Scandic Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandic Hotels Group has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Scandic Hotels go up and down completely randomly.
Pair Corralation between Darden Restaurants and Scandic Hotels
Assuming the 90 days trading horizon Darden Restaurants is expected to generate 2.8 times more return on investment than Scandic Hotels. However, Darden Restaurants is 2.8 times more volatile than Scandic Hotels Group. It trades about 0.19 of its potential returns per unit of risk. Scandic Hotels Group is currently generating about -0.16 per unit of risk. If you would invest 16,068 in Darden Restaurants on September 2, 2024 and sell it today you would earn a total of 1,559 from holding Darden Restaurants or generate 9.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Darden Restaurants vs. Scandic Hotels Group
Performance |
| Timeline |
| Darden Restaurants |
| Scandic Hotels Group |
Darden Restaurants and Scandic Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Darden Restaurants and Scandic Hotels
The main advantage of trading using opposite Darden Restaurants and Scandic Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darden Restaurants position performs unexpectedly, Scandic Hotels 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 Scandic Hotels will offset losses from the drop in Scandic Hotels' long position.| Darden Restaurants vs. Uniper SE | Darden Restaurants vs. Mulberry Group PLC | Darden Restaurants vs. London Security Plc | Darden Restaurants vs. Triad Group PLC |
| Scandic Hotels vs. Oakley Capital Investments | Scandic Hotels vs. United Internet AG | Scandic Hotels vs. Waste Management | Scandic Hotels vs. Young Cos Brewery |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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