Correlation Between Darden Restaurants and Impax Asset

Can any of the company-specific risk be diversified away by investing in both Darden Restaurants and Impax Asset 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 Impax Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Darden Restaurants and Impax Asset Management, you can compare the effects of market volatilities on Darden Restaurants and Impax Asset 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 Impax Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Impax Asset.

Diversification Opportunities for Darden Restaurants and Impax Asset

-0.55

Correlation Coefficient

Darden Restaurants  Impax Asset

Excellent diversification

The 3 months correlation between Darden and Impax is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Impax Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impax Asset Management 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 Impax Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impax Asset Management has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Impax Asset go up and down completely randomly.

Pair Corralation between Darden Restaurants and Impax Asset

Assuming the 90 days trading horizon Darden Restaurants is expected to generate 0.58 times more return on investment than Impax Asset. However, Darden Restaurants is 1.74 times less risky than Impax Asset. It trades about 0.06 of its potential returns per unit of risk. Impax Asset Management is currently generating about -0.05 per unit of risk. If you would invest  15,116  in Darden Restaurants on September 23, 2024 and sell it today you would earn a total of  3,582  from holding Darden Restaurants or generate 23.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.43%
Values	Daily Returns

Darden Restaurants  vs.  Impax Asset Management

Darden Restaurants

Risk-Adjusted Performance

5 of 100

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.

Impax Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Impax Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Darden Restaurants and Impax Asset

The main advantage of trading using opposite Darden Restaurants and Impax Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darden Restaurants position performs unexpectedly, Impax Asset 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 Impax Asset will offset losses from the drop in Impax Asset's long position.

The idea behind Darden Restaurants and Impax Asset Management 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.