Correlation Between Darden Restaurants and Torrid Holdings
Can any of the company-specific risk be diversified away by investing in both Darden Restaurants and Torrid Holdings 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 Torrid Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darden Restaurants and Torrid Holdings, you can compare the effects of market volatilities on Darden Restaurants and Torrid Holdings 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 Torrid Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Torrid Holdings.
Diversification Opportunities for Darden Restaurants and Torrid Holdings
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Darden and Torrid is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Torrid Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torrid Holdings 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 Torrid Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torrid Holdings has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Torrid Holdings go up and down completely randomly.
Pair Corralation between Darden Restaurants and Torrid Holdings
Considering the 90-day investment horizon Darden Restaurants is expected to generate 0.28 times more return on investment than Torrid Holdings. However, Darden Restaurants is 3.61 times less risky than Torrid Holdings. It trades about 0.11 of its potential returns per unit of risk. Torrid Holdings is currently generating about -0.09 per unit of risk. If you would invest 15,557 in Darden Restaurants on August 28, 2024 and sell it today you would earn a total of 1,965 from holding Darden Restaurants or generate 12.63% 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. Torrid Holdings
Performance |
| Timeline |
| Darden Restaurants |
| Torrid Holdings |
Darden Restaurants and Torrid Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Darden Restaurants and Torrid Holdings
The main advantage of trading using opposite Darden Restaurants and Torrid Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darden Restaurants position performs unexpectedly, Torrid Holdings 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 Torrid Holdings will offset losses from the drop in Torrid Holdings' long position.| Darden Restaurants vs. Dine Brands Global | Darden Restaurants vs. Bloomin Brands | Darden Restaurants vs. BJs Restaurants | Darden Restaurants vs. The Cheesecake Factory |
| Torrid Holdings vs. Cato Corporation | Torrid Holdings vs. Shoe Carnival | Torrid Holdings vs. Genesco | Torrid Holdings vs. Zumiez Inc |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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