Correlation Between Driven Brands and First Trust
Can any of the company-specific risk be diversified away by investing in both Driven Brands and First Trust 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 Driven Brands and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Driven Brands Holdings and First Trust RBA, you can compare the effects of market volatilities on Driven Brands and First Trust 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 Driven Brands with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Driven Brands and First Trust.
Diversification Opportunities for Driven Brands and First Trust
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Driven and First is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Driven Brands Holdings and First Trust RBA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust RBA and Driven Brands 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 Driven Brands Holdings are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust RBA has no effect on the direction of Driven Brands i.e., Driven Brands and First Trust go up and down completely randomly.
Pair Corralation between Driven Brands and First Trust
Given the investment horizon of 90 days Driven Brands Holdings is expected to generate 1.22 times more return on investment than First Trust. However, Driven Brands is 1.22 times more volatile than First Trust RBA. It trades about 0.07 of its potential returns per unit of risk. First Trust RBA is currently generating about -0.09 per unit of risk. If you would invest 1,622 in Driven Brands Holdings on December 27, 2024 and sell it today you would earn a total of 116.00 from holding Driven Brands Holdings or generate 7.15% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Driven Brands Holdings vs. First Trust RBA
Performance |
Timeline |
Driven Brands Holdings |
First Trust RBA |
Driven Brands and First Trust Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Driven Brands and First Trust
The main advantage of trading using opposite Driven Brands and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Driven Brands position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.Driven Brands vs. CarGurus | Driven Brands vs. KAR Auction Services | Driven Brands vs. Kingsway Financial Services | Driven Brands vs. Group 1 Automotive |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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