Correlation Between GM and Driven Brands

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

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

Diversification Opportunities for GM and Driven Brands

0.05

Correlation Coefficient

GM  Driven Brands

Significant diversification

The 3 months correlation between GM and Driven is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Driven Brands go up and down completely randomly.

Pair Corralation between GM and Driven Brands

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Driven Brands. In addition to that, GM is 1.28 times more volatile than Driven Brands Holdings. It trades about -0.03 of its total potential returns per unit of risk. Driven Brands Holdings is currently generating about 0.06 per unit of volatility. If you would invest  1,638  in Driven Brands Holdings on December 26, 2024 and sell it today you would earn a total of  100.00  from holding Driven Brands Holdings or generate 6.11% return on investment over 90 days.

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

General Motors  vs.  Driven Brands Holdings

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Driven Brands Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Driven Brands Holdings are ranked lower than 4 (%) 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.

Pair Trading with GM and Driven Brands

The main advantage of trading using opposite GM and Driven Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.