Correlation Between Darden Restaurants and WestRock

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

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

Diversification Opportunities for Darden Restaurants and WestRock

-0.73

Correlation Coefficient

Darden Restaurants  WestRock

Pay attention - limited upside

The 3 months correlation between Darden and WestRock is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and WestRock Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WestRock 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 WestRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WestRock has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and WestRock go up and down completely randomly.

Pair Corralation between Darden Restaurants and WestRock

Considering the 90-day investment horizon Darden Restaurants is expected to generate 1.09 times less return on investment than WestRock. But when comparing it to its historical volatility, Darden Restaurants is 1.45 times less risky than WestRock. It trades about 0.06 of its potential returns per unit of risk. WestRock Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,970  in WestRock Co on March 2, 2024 and sell it today you would earn a total of  1,454  from holding WestRock Co or generate 36.62% return on investment over 90 days.

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

Darden Restaurants  vs.  WestRock Co

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

WestRock

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WestRock Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, WestRock disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Darden Restaurants and WestRock

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

The idea behind Darden Restaurants and WestRock Co 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..