Correlation Between Darden Restaurants and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Darden Restaurants and Coca Cola 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 Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darden Restaurants and Coca Cola HBC, you can compare the effects of market volatilities on Darden Restaurants and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Coca Cola.
Diversification Opportunities for Darden Restaurants and Coca Cola
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Darden and Coca is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Coca Cola HBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola HBC 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola HBC has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Coca Cola go up and down completely randomly.
Pair Corralation between Darden Restaurants and Coca Cola
Assuming the 90 days trading horizon Darden Restaurants is expected to generate 1.57 times less return on investment than Coca Cola. But when comparing it to its historical volatility, Darden Restaurants is 1.19 times less risky than Coca Cola. It trades about 0.05 of its potential returns per unit of risk. Coca Cola HBC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,173 in Coca Cola HBC on September 4, 2024 and sell it today you would earn a total of 1,211 from holding Coca Cola HBC or generate 55.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Darden Restaurants vs. Coca Cola HBC
Performance |
| Timeline |
| Darden Restaurants |
| Coca Cola HBC |
Darden Restaurants and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Darden Restaurants and Coca Cola
The main advantage of trading using opposite Darden Restaurants and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darden Restaurants position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.| Darden Restaurants vs. Apple Inc | Darden Restaurants vs. Apple Inc | Darden Restaurants vs. Apple Inc | Darden Restaurants vs. Apple Inc |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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