Correlation Between Driven Brands and VanEck Environmental

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

Diversification Opportunities for Driven Brands and VanEck Environmental

0.81

Correlation Coefficient

Driven Brands  VanEck Environmental

Very poor diversification

The 3 months correlation between Driven and VanEck is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Driven Brands Holdings and VanEck Environmental Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Environmental 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 VanEck Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Environmental has no effect on the direction of Driven Brands i.e., Driven Brands and VanEck Environmental go up and down completely randomly.

Pair Corralation between Driven Brands and VanEck Environmental

Given the investment horizon of 90 days Driven Brands Holdings is expected to generate 2.04 times more return on investment than VanEck Environmental. However, Driven Brands is 2.04 times more volatile than VanEck Environmental Services. It trades about 0.29 of its potential returns per unit of risk. VanEck Environmental Services is currently generating about 0.21 per unit of risk. If you would invest  1,488  in Driven Brands Holdings on September 5, 2024 and sell it today you would earn a total of  199.00  from holding Driven Brands Holdings or generate 13.37% return on investment over 90 days.

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

Driven Brands Holdings  vs.  VanEck Environmental Services

Driven Brands Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Driven Brands Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Driven Brands displayed solid returns over the last few months and may actually be approaching a breakup point.

VanEck Environmental

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Environmental Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, VanEck Environmental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Driven Brands and VanEck Environmental

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

The idea behind Driven Brands Holdings and VanEck Environmental Services 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.