Correlation Between DraftKings and Darden Restaurants

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

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

Diversification Opportunities for DraftKings and Darden Restaurants

-0.03

Correlation Coefficient

DraftKings  Darden Restaurants

Good diversification

The 3 months correlation between DraftKings and Darden is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding DraftKings and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and DraftKings 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 DraftKings 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 DraftKings i.e., DraftKings and Darden Restaurants go up and down completely randomly.

Pair Corralation between DraftKings and Darden Restaurants

Given the investment horizon of 90 days DraftKings is expected to under-perform the Darden Restaurants. In addition to that, DraftKings is 2.17 times more volatile than Darden Restaurants. It trades about -0.31 of its total potential returns per unit of risk. Darden Restaurants is currently generating about -0.13 per unit of volatility. If you would invest  16,214  in Darden Restaurants on January 26, 2024 and sell it today you would lose (553.00) from holding Darden Restaurants or give up 3.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

DraftKings  vs.  Darden Restaurants

DraftKings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DraftKings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DraftKings may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Darden Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Darden Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with DraftKings and Darden Restaurants

The main advantage of trading using opposite DraftKings and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DraftKings 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 DraftKings 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.