Correlation Between Darden Restaurants and AutoZone
Can any of the company-specific risk be diversified away by investing in both Darden Restaurants and AutoZone 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 AutoZone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darden Restaurants and AutoZone, you can compare the effects of market volatilities on Darden Restaurants and AutoZone 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 AutoZone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and AutoZone.
Diversification Opportunities for Darden Restaurants and AutoZone
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Darden and AutoZone is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone 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 AutoZone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoZone has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and AutoZone go up and down completely randomly.
Pair Corralation between Darden Restaurants and AutoZone
Assuming the 90 days trading horizon Darden Restaurants is expected to generate 1.26 times less return on investment than AutoZone. But when comparing it to its historical volatility, Darden Restaurants is 1.04 times less risky than AutoZone. It trades about 0.05 of its potential returns per unit of risk. AutoZone is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 248,400 in AutoZone on August 31, 2024 and sell it today you would earn a total of 53,100 from holding AutoZone or generate 21.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Darden Restaurants vs. AutoZone
Performance |
| Timeline |
| Darden Restaurants |
| AutoZone |
Darden Restaurants and AutoZone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Darden Restaurants and AutoZone
The main advantage of trading using opposite Darden Restaurants and AutoZone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darden Restaurants position performs unexpectedly, AutoZone 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 AutoZone will offset losses from the drop in AutoZone's long position.| Darden Restaurants vs. Apple Inc | Darden Restaurants vs. Apple Inc | Darden Restaurants vs. Apple Inc | Darden Restaurants vs. Apple Inc |
| AutoZone vs. BJs Restaurants | AutoZone vs. Darden Restaurants | AutoZone vs. SAFETY MEDICAL PROD | AutoZone vs. Treasury Wine Estates |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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