Correlation Between Driven Brands and WisdomTree International

Can any of the company-specific risk be diversified away by investing in both Driven Brands and WisdomTree International 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 WisdomTree International 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 WisdomTree International Equity, you can compare the effects of market volatilities on Driven Brands and WisdomTree International 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 WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Driven Brands and WisdomTree International.

Diversification Opportunities for Driven Brands and WisdomTree International

0.44

Correlation Coefficient

Driven Brands  WisdomTree International

Very weak diversification

The 3 months correlation between Driven and WisdomTree is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Driven Brands Holdings and WisdomTree International Equit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International 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 WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of Driven Brands i.e., Driven Brands and WisdomTree International go up and down completely randomly.

Pair Corralation between Driven Brands and WisdomTree International

Given the investment horizon of 90 days Driven Brands is expected to generate 195.6 times less return on investment than WisdomTree International. In addition to that, Driven Brands is 2.09 times more volatile than WisdomTree International Equity. It trades about 0.0 of its total potential returns per unit of risk. WisdomTree International Equity is currently generating about 0.14 per unit of volatility. If you would invest  5,362  in WisdomTree International Equity on November 19, 2024 and sell it today you would earn a total of  321.00  from holding WisdomTree International Equity or generate 5.99% return on investment over 90 days.

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

Driven Brands Holdings  vs.  WisdomTree International Equit

Driven Brands Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Driven Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Driven Brands is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

WisdomTree International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International Equity are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, WisdomTree International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Driven Brands and WisdomTree International

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

The idea behind Driven Brands Holdings and WisdomTree International Equity 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.