Correlation Between Darden Restaurants and Nufarm

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

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

Diversification Opportunities for Darden Restaurants and Nufarm

0.57

Correlation Coefficient

Darden Restaurants  Nufarm

Very weak diversification

The 3 months correlation between Darden and Nufarm is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited 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 Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Nufarm go up and down completely randomly.

Pair Corralation between Darden Restaurants and Nufarm

Assuming the 90 days trading horizon Darden Restaurants is expected to under-perform the Nufarm. But the stock apears to be less risky and, when comparing its historical volatility, Darden Restaurants is 1.05 times less risky than Nufarm. The stock trades about 0.0 of its potential returns per unit of risk. The Nufarm Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  272.00  in Nufarm Limited on April 4, 2024 and sell it today you would earn a total of  4.00  from holding Nufarm Limited or generate 1.47% return on investment over 90 days.

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

Darden Restaurants  vs.  Nufarm Limited

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Nufarm Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nufarm Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in August 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Darden Restaurants and Nufarm

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

The idea behind Darden Restaurants and Nufarm Limited 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 Commodity Directory module to find actively traded commodities issued by global exchanges.