Correlation Between Hilton Food and Darden Restaurants

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Can any of the company-specific risk be diversified away by investing in both Hilton Food and Darden Restaurants 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 Hilton Food and Darden Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hilton Food Group and Darden Restaurants, you can compare the effects of market volatilities on Hilton Food and Darden Restaurants 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 Hilton Food with a short position of Darden Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilton Food and Darden Restaurants.

Diversification Opportunities for Hilton Food and Darden Restaurants

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Hilton and Darden is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Food Group and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and Hilton Food 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 Hilton Food Group are associated (or correlated) with Darden Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darden Restaurants has no effect on the direction of Hilton Food i.e., Hilton Food and Darden Restaurants go up and down completely randomly.

Pair Corralation between Hilton Food and Darden Restaurants

Assuming the 90 days trading horizon Hilton Food Group is expected to generate 1.09 times more return on investment than Darden Restaurants. However, Hilton Food is 1.09 times more volatile than Darden Restaurants. It trades about 0.06 of its potential returns per unit of risk. Darden Restaurants is currently generating about 0.02 per unit of risk. If you would invest  67,293  in Hilton Food Group on September 19, 2024 and sell it today you would earn a total of  22,407  from holding Hilton Food Group or generate 33.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy96.47%
ValuesDaily Returns

Hilton Food Group  vs.  Darden Restaurants

 Performance 
       Timeline  
Hilton Food Group 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Food Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Hilton Food is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Darden Restaurants 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Darden Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Darden Restaurants is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Hilton Food and Darden Restaurants Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hilton Food and Darden Restaurants

The main advantage of trading using opposite Hilton Food and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Food position performs unexpectedly, Darden Restaurants 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 Darden Restaurants will offset losses from the drop in Darden Restaurants' long position.
The idea behind Hilton Food Group and Darden Restaurants pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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