Correlation Between Young Cos and Darden Restaurants

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

Diversification Opportunities for Young Cos and Darden Restaurants

YoungDardenDiversified AwayYoungDardenDiversified Away100%
0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Young and Darden is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Young Cos Brewery and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and Young Cos 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 Young Cos Brewery 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 Young Cos i.e., Young Cos and Darden Restaurants go up and down completely randomly.

Pair Corralation between Young Cos and Darden Restaurants

Assuming the 90 days trading horizon Young Cos is expected to generate 9.59 times less return on investment than Darden Restaurants. But when comparing it to its historical volatility, Young Cos Brewery is 2.3 times less risky than Darden Restaurants. It trades about 0.05 of its potential returns per unit of risk. Darden Restaurants is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  16,465  in Darden Restaurants on September 22, 2024 and sell it today you would earn a total of  2,233  from holding Darden Restaurants or generate 13.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Young Cos Brewery  vs.  Darden Restaurants

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -8-6-4-2024
JavaScript chart by amCharts 3.21.15YNGN 0I77
       Timeline  
Young Cos Brewery 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Young Cos Brewery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Young Cos is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec590600610620630640650
Darden Restaurants 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Darden Restaurants may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec155160165170175180185

Young Cos and Darden Restaurants Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.5-3.37-2.24-1.110.01.122.273.414.55 0.050.100.150.20
JavaScript chart by amCharts 3.21.15YNGN 0I77
       Returns  

Pair Trading with Young Cos and Darden Restaurants

The main advantage of trading using opposite Young Cos and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Young Cos 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 Young Cos Brewery 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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