Correlation Between Driven Brands and IShares Short

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

Diversification Opportunities for Driven Brands and IShares Short

0.51

Correlation Coefficient

Driven Brands  IShares Short

Very weak diversification

The 3 months correlation between Driven and IShares is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Driven Brands Holdings and iShares Short Maturity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Short Maturity 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 Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Short Maturity has no effect on the direction of Driven Brands i.e., Driven Brands and IShares Short go up and down completely randomly.

Pair Corralation between Driven Brands and IShares Short

Given the investment horizon of 90 days Driven Brands Holdings is expected to generate 29.29 times more return on investment than IShares Short. However, Driven Brands is 29.29 times more volatile than iShares Short Maturity. It trades about 0.1 of its potential returns per unit of risk. iShares Short Maturity is currently generating about 0.2 per unit of risk. If you would invest  1,596  in Driven Brands Holdings on December 29, 2024 and sell it today you would earn a total of  190.00  from holding Driven Brands Holdings or generate 11.9% 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.  iShares Short Maturity

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 8 (%) 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.

iShares Short Maturity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Short Maturity are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Short is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Driven Brands and IShares Short

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

The idea behind Driven Brands Holdings and iShares Short Maturity 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 Stocks Directory module to find actively traded stocks across global markets.