Correlation Between Darden Restaurants and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Darden Restaurants and Scandinavian Tobacco 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 Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darden Restaurants and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Darden Restaurants and Scandinavian Tobacco 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 Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Scandinavian Tobacco.
Diversification Opportunities for Darden Restaurants and Scandinavian Tobacco
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Darden and Scandinavian is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco 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 Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Darden Restaurants and Scandinavian Tobacco
Assuming the 90 days trading horizon Darden Restaurants is expected to generate 0.98 times more return on investment than Scandinavian Tobacco. However, Darden Restaurants is 1.02 times less risky than Scandinavian Tobacco. It trades about 0.06 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.01 per unit of risk. If you would invest 12,972 in Darden Restaurants on September 24, 2024 and sell it today you would earn a total of 5,726 from holding Darden Restaurants or generate 44.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 93.82% |
| Values | Daily Returns |
Darden Restaurants vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Darden Restaurants |
| Scandinavian Tobacco |
Darden Restaurants and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Darden Restaurants and Scandinavian Tobacco
The main advantage of trading using opposite Darden Restaurants and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darden Restaurants position performs unexpectedly, Scandinavian Tobacco 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 Scandinavian Tobacco will offset losses from the drop in Scandinavian Tobacco's 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 |
| Scandinavian Tobacco vs. Zegona Communications Plc | Scandinavian Tobacco vs. Hochschild Mining plc | Scandinavian Tobacco vs. Griffin Mining | Scandinavian Tobacco vs. Datagroup SE |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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