Correlation Between Darden Restaurants and Sprinklr

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

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

Diversification Opportunities for Darden Restaurants and Sprinklr

0.78

Correlation Coefficient

Darden Restaurants  Sprinklr

Poor diversification

The 3 months correlation between Darden and Sprinklr is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Sprinklr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprinklr and Darden Restaurants 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 Darden Restaurants are associated (or correlated) with Sprinklr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprinklr has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Sprinklr go up and down completely randomly.

Pair Corralation between Darden Restaurants and Sprinklr

Considering the 90-day investment horizon Darden Restaurants is expected to generate 0.95 times more return on investment than Sprinklr. However, Darden Restaurants is 1.05 times less risky than Sprinklr. It trades about -0.28 of its potential returns per unit of risk. Sprinklr is currently generating about -0.31 per unit of risk. If you would invest  17,144  in Darden Restaurants on January 18, 2024 and sell it today you would lose (1,847) from holding Darden Restaurants or give up 10.77% of portfolio value over 90 days.

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

Darden Restaurants  vs.  Sprinklr

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.

Sprinklr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprinklr has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Sprinklr is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Darden Restaurants and Sprinklr

The main advantage of trading using opposite Darden Restaurants and Sprinklr positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darden Restaurants position performs unexpectedly, Sprinklr 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 Sprinklr will offset losses from the drop in Sprinklr's long position.

The idea behind Darden Restaurants and Sprinklr 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.