Correlation Between Darden Restaurants and Air New

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

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

Diversification Opportunities for Darden Restaurants and Air New

0.22

Correlation Coefficient

Darden Restaurants  Air New

Modest diversification

The 3 months correlation between Darden and Air is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Air New Zealand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air New Zealand 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 Air New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air New Zealand has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Air New go up and down completely randomly.

Pair Corralation between Darden Restaurants and Air New

Assuming the 90 days trading horizon Darden Restaurants is expected to generate 0.78 times more return on investment than Air New. However, Darden Restaurants is 1.28 times less risky than Air New. It trades about 0.03 of its potential returns per unit of risk. Air New Zealand is currently generating about -0.02 per unit of risk. If you would invest  17,363  in Darden Restaurants on May 7, 2025 and sell it today you would earn a total of  302.00  from holding Darden Restaurants or generate 1.74% return on investment over 90 days.

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

Darden Restaurants  vs.  Air New Zealand

Darden Restaurants

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Darden Restaurants is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Air New Zealand

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air New Zealand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Air New is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Darden Restaurants and Air New

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

The idea behind Darden Restaurants and Air New Zealand 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.