Correlation Between Darden Restaurants and Ideanomics

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

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

Diversification Opportunities for Darden Restaurants and Ideanomics

0.32

Correlation Coefficient

Darden Restaurants  Ideanomics

Weak diversification

The 3 months correlation between Darden and Ideanomics is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Ideanomics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ideanomics 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 Ideanomics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ideanomics has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Ideanomics go up and down completely randomly.

Pair Corralation between Darden Restaurants and Ideanomics

Considering the 90-day investment horizon Darden Restaurants is expected to generate 0.15 times more return on investment than Ideanomics. However, Darden Restaurants is 6.74 times less risky than Ideanomics. It trades about -0.04 of its potential returns per unit of risk. Ideanomics is currently generating about -0.01 per unit of risk. If you would invest  16,032  in Darden Restaurants on January 24, 2024 and sell it today you would lose (577.00) from holding Darden Restaurants or give up 3.6% of portfolio value over 90 days.

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

Darden Restaurants  vs.  Ideanomics

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.

Ideanomics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ideanomics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Darden Restaurants and Ideanomics

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

The idea behind Darden Restaurants and Ideanomics 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.