Correlation Between AutoZone and Darden Restaurants

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both AutoZone 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 AutoZone and Darden Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoZone and Darden Restaurants, you can compare the effects of market volatilities on AutoZone 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 AutoZone with a short position of Darden Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoZone and Darden Restaurants.

Diversification Opportunities for AutoZone and Darden Restaurants

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between AutoZone and Darden is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and AutoZone 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 AutoZone 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 AutoZone i.e., AutoZone and Darden Restaurants go up and down completely randomly.

Pair Corralation between AutoZone and Darden Restaurants

Considering the 90-day investment horizon AutoZone is expected to generate 0.6 times more return on investment than Darden Restaurants. However, AutoZone is 1.67 times less risky than Darden Restaurants. It trades about 0.28 of its potential returns per unit of risk. Darden Restaurants is currently generating about -0.03 per unit of risk. If you would invest  295,499  in AutoZone on December 29, 2023 and sell it today you would earn a total of  19,666  from holding AutoZone or generate 6.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

AutoZone  vs.  Darden Restaurants

 Performance 
       Timeline  
AutoZone 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, AutoZone displayed solid returns over the last few months and may actually be approaching a breakup point.
Darden Restaurants 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Darden Restaurants is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

AutoZone and Darden Restaurants Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AutoZone and Darden Restaurants

The main advantage of trading using opposite AutoZone and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoZone 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 AutoZone 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

Other Complementary Tools

Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Price Transformation
Use Price Transformation models to analyze the depth of different equity instruments across global markets
Portfolio Suggestion
Get suggestions outside of your existing asset allocation including your own model portfolios
Positions Ratings
Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance
AI Investment Finder
Use AI to screen and filter profitable investment opportunities