Correlation Between Driven Brands and IShares Industrials

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

Diversification Opportunities for Driven Brands and IShares Industrials

-0.2

Correlation Coefficient

Driven Brands  IShares Industrials

Good diversification

The 3 months correlation between Driven and IShares is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Driven Brands Holdings and iShares Industrials ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Industrials ETF 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 IShares Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Industrials ETF has no effect on the direction of Driven Brands i.e., Driven Brands and IShares Industrials go up and down completely randomly.

Pair Corralation between Driven Brands and IShares Industrials

Given the investment horizon of 90 days Driven Brands Holdings is expected to generate 1.92 times more return on investment than IShares Industrials. However, Driven Brands is 1.92 times more volatile than iShares Industrials ETF. It trades about 0.1 of its potential returns per unit of risk. iShares Industrials ETF is currently generating about -0.05 per unit of risk. If you would invest  1,596  in Driven Brands Holdings on December 28, 2024 and sell it today you would earn a total of  183.00  from holding Driven Brands Holdings or generate 11.47% 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.  iShares Industrials ETF

Driven Brands Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Driven Brands Holdings are ranked lower than 7 (%) 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 April 2025.

iShares Industrials ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Industrials ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, IShares Industrials is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Driven Brands and IShares Industrials

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

The idea behind Driven Brands Holdings and iShares Industrials ETF 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.