Correlation Between Darden Restaurants, and Bank of America

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

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

Diversification Opportunities for Darden Restaurants, and Bank of America

0.74

Correlation Coefficient

Darden Restaurants,  Bank of America

Poor diversification

The 3 months correlation between Darden and Bank is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants, and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Darden Restaurants, i.e., Darden Restaurants, and Bank of America go up and down completely randomly.

Pair Corralation between Darden Restaurants, and Bank of America

Assuming the 90 days trading horizon Darden Restaurants, is expected to under-perform the Bank of America. But the stock apears to be less risky and, when comparing its historical volatility, Darden Restaurants, is 1.64 times less risky than Bank of America. The stock trades about -0.01 of its potential returns per unit of risk. The Bank of America is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  6,249  in Bank of America on March 28, 2025 and sell it today you would earn a total of  267.00  from holding Bank of America or generate 4.27% return on investment over 90 days.

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

Darden Restaurants,  vs.  Bank of America

Darden Restaurants,

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Darden Restaurants, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bank of America

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Pair Trading with Darden Restaurants, and Bank of America

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

The idea behind Darden Restaurants, and Bank of America 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 Global Correlations module to find global opportunities by holding instruments from different markets.