Correlation Between 3I Group and Darden Restaurants

Can any of the company-specific risk be diversified away by investing in both 3I Group 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 3I Group and Darden Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 3I Group PLC and Darden Restaurants, you can compare the effects of market volatilities on 3I Group 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 3I Group with a short position of Darden Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3I Group and Darden Restaurants.

Diversification Opportunities for 3I Group and Darden Restaurants

0.63

Correlation Coefficient

3I Group  Darden Restaurants

Poor diversification

The 3 months correlation between III and Darden is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding 3I Group PLC and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and 3I Group 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 3I Group PLC 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 3I Group i.e., 3I Group and Darden Restaurants go up and down completely randomly.

Pair Corralation between 3I Group and Darden Restaurants

Assuming the 90 days trading horizon 3I Group PLC is expected to under-perform the Darden Restaurants. But the stock apears to be less risky and, when comparing its historical volatility, 3I Group PLC is 3.38 times less risky than Darden Restaurants. The stock trades about -0.11 of its potential returns per unit of risk. The Darden Restaurants is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  17,716  in Darden Restaurants on September 24, 2024 and sell it today you would earn a total of  982.00  from holding Darden Restaurants or generate 5.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

3I Group PLC  vs.  Darden Restaurants

3I Group PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 3I Group PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, 3I Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with 3I Group and Darden Restaurants

The main advantage of trading using opposite 3I Group and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3I Group 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 3I Group PLC 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.

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.