Correlation Between Collins Foods and Darden Restaurants

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

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

Diversification Opportunities for Collins Foods and Darden Restaurants

-0.36

Correlation Coefficient

Collins Foods  Darden Restaurants

Very good diversification

The 3 months correlation between Collins and Darden is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Collins Foods Limited and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and Collins Foods 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 Collins Foods Limited 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 Collins Foods i.e., Collins Foods and Darden Restaurants go up and down completely randomly.

Pair Corralation between Collins Foods and Darden Restaurants

Assuming the 90 days horizon Collins Foods Limited is expected to generate 2.27 times more return on investment than Darden Restaurants. However, Collins Foods is 2.27 times more volatile than Darden Restaurants. It trades about 0.07 of its potential returns per unit of risk. Darden Restaurants is currently generating about 0.02 per unit of risk. If you would invest  446.00  in Collins Foods Limited on April 24, 2025 and sell it today you would earn a total of  46.00  from holding Collins Foods Limited or generate 10.31% return on investment over 90 days.

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

Collins Foods Limited  vs.  Darden Restaurants

Collins Foods Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Collins Foods Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Collins Foods may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Darden Restaurants

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Darden Restaurants is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Collins Foods and Darden Restaurants

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

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.