Correlation Between Driven Brands and Exponent

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

Diversification Opportunities for Driven Brands and Exponent

-0.67

Correlation Coefficient

Driven Brands  Exponent

Excellent diversification

The 3 months correlation between Driven and Exponent is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Driven Brands Holdings and Exponent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exponent 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 Exponent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exponent has no effect on the direction of Driven Brands i.e., Driven Brands and Exponent go up and down completely randomly.

Pair Corralation between Driven Brands and Exponent

Given the investment horizon of 90 days Driven Brands Holdings is expected to under-perform the Exponent. In addition to that, Driven Brands is 1.49 times more volatile than Exponent. It trades about -0.02 of its total potential returns per unit of risk. Exponent is currently generating about 0.01 per unit of volatility. If you would invest  9,469  in Exponent on September 26, 2024 and sell it today you would lose (424.00) from holding Exponent or give up 4.48% of portfolio value over 90 days.

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

Driven Brands Holdings  vs.  Exponent

Driven Brands Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Driven Brands Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Driven Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Exponent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exponent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Driven Brands and Exponent

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

The idea behind Driven Brands Holdings and Exponent 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.