Correlation Between ESGL Holdings and Driven Brands

Can any of the company-specific risk be diversified away by investing in both ESGL Holdings and Driven Brands 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 ESGL Holdings and Driven Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ESGL Holdings Limited and Driven Brands Holdings, you can compare the effects of market volatilities on ESGL Holdings and Driven Brands 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 ESGL Holdings with a short position of Driven Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESGL Holdings and Driven Brands.

Diversification Opportunities for ESGL Holdings and Driven Brands

-0.75

Correlation Coefficient

ESGL Holdings  Driven Brands

Pay attention - limited upside

The 3 months correlation between ESGL and Driven is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding ESGL Holdings Limited and Driven Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Driven Brands Holdings and ESGL Holdings 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 ESGL Holdings Limited are associated (or correlated) with Driven Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Driven Brands Holdings has no effect on the direction of ESGL Holdings i.e., ESGL Holdings and Driven Brands go up and down completely randomly.

Pair Corralation between ESGL Holdings and Driven Brands

Given the investment horizon of 90 days ESGL Holdings Limited is expected to under-perform the Driven Brands. In addition to that, ESGL Holdings is 3.49 times more volatile than Driven Brands Holdings. It trades about -0.27 of its total potential returns per unit of risk. Driven Brands Holdings is currently generating about 0.07 per unit of volatility. If you would invest  1,571  in Driven Brands Holdings on September 21, 2024 and sell it today you would earn a total of  38.00  from holding Driven Brands Holdings or generate 2.42% return on investment over 90 days.

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

ESGL Holdings Limited  vs.  Driven Brands Holdings

ESGL Holdings Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESGL Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Etf's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Driven Brands Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Driven Brands Holdings are ranked lower than 5 (%) 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.

Pair Trading with ESGL Holdings and Driven Brands

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

The idea behind ESGL Holdings Limited and Driven Brands Holdings 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.