Correlation Between Darden Restaurants and National Grid
Can any of the company-specific risk be diversified away by investing in both Darden Restaurants and National Grid 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 National Grid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darden Restaurants and National Grid plc, you can compare the effects of market volatilities on Darden Restaurants and National Grid 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 National Grid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and National Grid.
Diversification Opportunities for Darden Restaurants and National Grid
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Darden and National is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and National Grid plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Grid plc 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 National Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Grid plc has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and National Grid go up and down completely randomly.
Pair Corralation between Darden Restaurants and National Grid
Assuming the 90 days trading horizon Darden Restaurants is expected to under-perform the National Grid. But the stock apears to be less risky and, when comparing its historical volatility, Darden Restaurants is 2.43 times less risky than National Grid. The stock trades about -0.03 of its potential returns per unit of risk. The National Grid plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,600 in National Grid plc on October 25, 2024 and sell it today you would earn a total of 100.00 from holding National Grid plc or generate 1.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Darden Restaurants vs. National Grid plc
Performance |
| Timeline |
| Darden Restaurants |
| National Grid plc |
Darden Restaurants and National Grid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Darden Restaurants and National Grid
The main advantage of trading using opposite Darden Restaurants and National Grid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darden Restaurants position performs unexpectedly, National Grid 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 National Grid will offset losses from the drop in National Grid's long position.| Darden Restaurants vs. Apple Inc | Darden Restaurants vs. Apple Inc | Darden Restaurants vs. Apple Inc | Darden Restaurants vs. Apple Inc |
| National Grid vs. Commercial Vehicle Group | National Grid vs. SILICON LABORATOR | National Grid vs. INDO RAMA SYNTHETIC | National Grid vs. TRI CHEMICAL LABORATINC |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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