Correlation Between IShares Industrials and Driven Brands

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

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

Diversification Opportunities for IShares Industrials and Driven Brands

0.61

Correlation Coefficient

IShares Industrials  Driven Brands

Poor diversification

The 3 months correlation between IShares and Driven is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding iShares Industrials ETF 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 IShares Industrials 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 iShares Industrials ETF 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 IShares Industrials i.e., IShares Industrials and Driven Brands go up and down completely randomly.

Pair Corralation between IShares Industrials and Driven Brands

Considering the 90-day investment horizon iShares Industrials ETF is expected to under-perform the Driven Brands. But the etf apears to be less risky and, when comparing its historical volatility, iShares Industrials ETF is 2.13 times less risky than Driven Brands. The etf trades about -0.07 of its potential returns per unit of risk. The Driven Brands Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,698  in Driven Brands Holdings on December 1, 2024 and sell it today you would earn a total of  55.00  from holding Driven Brands Holdings or generate 3.24% return on investment over 90 days.

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

iShares Industrials ETF  vs.  Driven Brands Holdings

iShares Industrials ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Industrials ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, IShares Industrials is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Driven Brands Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Driven Brands Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Driven Brands is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Industrials and Driven Brands

The main advantage of trading using opposite IShares Industrials and Driven Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Industrials 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 iShares Industrials ETF 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.