Correlation Between Driven Brands and Kingsway Financial

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

Diversification Opportunities for Driven Brands and Kingsway Financial

0.5

Correlation Coefficient

Driven Brands  Kingsway Financial

Very weak diversification

The 3 months correlation between Driven and Kingsway is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Driven Brands Holdings and Kingsway Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingsway Financial 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 Kingsway Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingsway Financial has no effect on the direction of Driven Brands i.e., Driven Brands and Kingsway Financial go up and down completely randomly.

Pair Corralation between Driven Brands and Kingsway Financial

Given the investment horizon of 90 days Driven Brands Holdings is expected to generate 1.15 times more return on investment than Kingsway Financial. However, Driven Brands is 1.15 times more volatile than Kingsway Financial Services. It trades about 0.15 of its potential returns per unit of risk. Kingsway Financial Services is currently generating about 0.1 per unit of risk. If you would invest  1,407  in Driven Brands Holdings on September 2, 2024 and sell it today you would earn a total of  278.00  from holding Driven Brands Holdings or generate 19.76% 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.  Kingsway Financial 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.

Kingsway Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingsway Financial Services are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Kingsway Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Driven Brands and Kingsway Financial

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

The idea behind Driven Brands Holdings and Kingsway Financial 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.