Correlation Between Darden Restaurants and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both Darden Restaurants and Selective Insurance 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 Selective Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darden Restaurants and Selective Insurance Group, you can compare the effects of market volatilities on Darden Restaurants and Selective Insurance 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 Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Selective Insurance.
Diversification Opportunities for Darden Restaurants and Selective Insurance
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Darden and Selective is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance 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 Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Selective Insurance go up and down completely randomly.
Pair Corralation between Darden Restaurants and Selective Insurance
Assuming the 90 days trading horizon Darden Restaurants is expected to generate 0.73 times more return on investment than Selective Insurance. However, Darden Restaurants is 1.38 times less risky than Selective Insurance. It trades about 0.07 of its potential returns per unit of risk. Selective Insurance Group is currently generating about -0.01 per unit of risk. If you would invest 12,616 in Darden Restaurants on November 9, 2024 and sell it today you would earn a total of 6,644 from holding Darden Restaurants or generate 52.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Darden Restaurants vs. Selective Insurance Group
Performance |
| Timeline |
| Darden Restaurants |
| Selective Insurance |
Darden Restaurants and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Darden Restaurants and Selective Insurance
The main advantage of trading using opposite Darden Restaurants and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darden Restaurants position performs unexpectedly, Selective Insurance 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 Selective Insurance will offset losses from the drop in Selective Insurance's long position.| Darden Restaurants vs. Diamyd Medical AB | Darden Restaurants vs. PULSION Medical Systems | Darden Restaurants vs. MeVis Medical Solutions | Darden Restaurants vs. CHEMICAL INDUSTRIES |
| Selective Insurance vs. CORNISH METALS INC | Selective Insurance vs. MHP Hotel AG | Selective Insurance vs. NH HOTEL GROUP | Selective Insurance vs. Fortescue Metals Group |
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 Stocks Directory module to find actively traded stocks across global markets.
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