Correlation Between Parkson Retail and Darden Restaurants

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

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

Diversification Opportunities for Parkson Retail and Darden Restaurants

0.2

Correlation Coefficient

Parkson Retail  Darden Restaurants

Modest diversification

The 3 months correlation between Parkson and Darden is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Parkson Retail Group and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and Parkson Retail 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 Parkson Retail Group 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 Parkson Retail i.e., Parkson Retail and Darden Restaurants go up and down completely randomly.

Pair Corralation between Parkson Retail and Darden Restaurants

Assuming the 90 days trading horizon Parkson Retail Group is expected to generate 8.98 times more return on investment than Darden Restaurants. However, Parkson Retail is 8.98 times more volatile than Darden Restaurants. It trades about 0.06 of its potential returns per unit of risk. Darden Restaurants is currently generating about 0.03 per unit of risk. If you would invest  1.15  in Parkson Retail Group on March 18, 2024 and sell it today you would earn a total of  0.00  from holding Parkson Retail Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.52%
Values	Daily Returns

Parkson Retail Group  vs.  Darden Restaurants

Parkson Retail Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parkson Retail Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Parkson Retail reported solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of comparatively stable basic indicators, Darden Restaurants is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Parkson Retail and Darden Restaurants

The main advantage of trading using opposite Parkson Retail and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parkson Retail 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 Parkson Retail Group 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.