Correlation Between Studio City and Darden Restaurants

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

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

Diversification Opportunities for Studio City and Darden Restaurants

-0.68

Correlation Coefficient

Studio City  Darden Restaurants

Excellent diversification

The 3 months correlation between Studio and Darden is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Studio City International and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and Studio City 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 Studio City International 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 Studio City i.e., Studio City and Darden Restaurants go up and down completely randomly.

Pair Corralation between Studio City and Darden Restaurants

Considering the 90-day investment horizon Studio City International is expected to under-perform the Darden Restaurants. In addition to that, Studio City is 5.16 times more volatile than Darden Restaurants. It trades about -0.12 of its total potential returns per unit of risk. Darden Restaurants is currently generating about -0.33 per unit of volatility. If you would invest  15,831  in Darden Restaurants on February 9, 2024 and sell it today you would lose (1,033) from holding Darden Restaurants or give up 6.53% of portfolio value over 90 days.

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

Studio City International  vs.  Darden Restaurants

Studio City International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Studio City International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Studio City exhibited 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. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Studio City and Darden Restaurants

The main advantage of trading using opposite Studio City and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Studio City 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 Studio City International 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.