Correlation Between Tradegate and Darden Restaurants

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

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

Diversification Opportunities for Tradegate and Darden Restaurants

0.28

Correlation Coefficient

Tradegate  Darden Restaurants

Modest diversification

The 3 months correlation between Tradegate and Darden is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Tradegate AG Wertpapierhandels and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and Tradegate 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 Tradegate AG Wertpapierhandelsbank 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 Tradegate i.e., Tradegate and Darden Restaurants go up and down completely randomly.

Pair Corralation between Tradegate and Darden Restaurants

Assuming the 90 days horizon Tradegate AG Wertpapierhandelsbank is expected to under-perform the Darden Restaurants. But the stock apears to be less risky and, when comparing its historical volatility, Tradegate AG Wertpapierhandelsbank is 1.24 times less risky than Darden Restaurants. The stock trades about -0.03 of its potential returns per unit of risk. The Darden Restaurants is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  12,762  in Darden Restaurants on September 29, 2024 and sell it today you would earn a total of  5,273  from holding Darden Restaurants or generate 41.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Tradegate AG Wertpapierhandels  vs.  Darden Restaurants

Tradegate AG Wertpap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tradegate AG Wertpapierhandelsbank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tradegate is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Darden Restaurants

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Darden Restaurants unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tradegate and Darden Restaurants

The main advantage of trading using opposite Tradegate and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tradegate 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 Tradegate AG Wertpapierhandelsbank 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.