Correlation Between Starbucks and Darden Restaurants
Can any of the company-specific risk be diversified away by investing in both Starbucks 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 Starbucks and Darden Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Starbucks and Darden Restaurants, you can compare the effects of market volatilities on Starbucks 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 Starbucks with a short position of Darden Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and Darden Restaurants.
Diversification Opportunities for Starbucks and Darden Restaurants
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Starbucks and Darden is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and Starbucks 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 Starbucks 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 Starbucks i.e., Starbucks and Darden Restaurants go up and down completely randomly.
Pair Corralation between Starbucks and Darden Restaurants
Given the investment horizon of 90 days Starbucks is expected to under-perform the Darden Restaurants. In addition to that, Starbucks is 1.08 times more volatile than Darden Restaurants. It trades about -0.04 of its total potential returns per unit of risk. Darden Restaurants is currently generating about -0.02 per unit of volatility. If you would invest 16,327 in Darden Restaurants on January 24, 2024 and sell it today you would lose (872.00) from holding Darden Restaurants or give up 5.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Starbucks vs. Darden Restaurants
Performance |
| Timeline |
| Starbucks |
| Darden Restaurants |
Starbucks and Darden Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Starbucks and Darden Restaurants
The main advantage of trading using opposite Starbucks and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks 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.| Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
| Darden Restaurants vs. Dine Brands Global | Darden Restaurants vs. Bloomin Brands | Darden Restaurants vs. BJs Restaurants | Darden Restaurants vs. The Cheesecake Factory |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |