Correlation Between Driven Brands and Invesco DWA

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

Diversification Opportunities for Driven Brands and Invesco DWA

-0.39

Correlation Coefficient

Driven Brands  Invesco DWA

Very good diversification

The 3 months correlation between Driven and Invesco is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Driven Brands Holdings and Invesco DWA Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Industrials 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 Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Industrials has no effect on the direction of Driven Brands i.e., Driven Brands and Invesco DWA go up and down completely randomly.

Pair Corralation between Driven Brands and Invesco DWA

Given the investment horizon of 90 days Driven Brands Holdings is expected to generate 1.01 times more return on investment than Invesco DWA. However, Driven Brands is 1.01 times more volatile than Invesco DWA Industrials. It trades about 0.1 of its potential returns per unit of risk. Invesco DWA Industrials is currently generating about -0.07 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  193.00  from holding Driven Brands Holdings or generate 12.09% 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.  Invesco DWA Industrials

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.

Invesco DWA Industrials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco DWA Industrials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Driven Brands and Invesco DWA

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

The idea behind Driven Brands Holdings and Invesco DWA Industrials 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.