Correlation Between Driven Brands and Alight
Can any of the company-specific risk be diversified away by investing in both Driven Brands and Alight 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 Alight 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 Alight Inc, you can compare the effects of market volatilities on Driven Brands and Alight 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 Alight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Driven Brands and Alight.
Diversification Opportunities for Driven Brands and Alight
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Driven and Alight is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Driven Brands Holdings and Alight Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alight Inc 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 Alight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alight Inc has no effect on the direction of Driven Brands i.e., Driven Brands and Alight go up and down completely randomly.
Pair Corralation between Driven Brands and Alight
Given the investment horizon of 90 days Driven Brands Holdings is expected to generate 0.63 times more return on investment than Alight. However, Driven Brands Holdings is 1.59 times less risky than Alight. It trades about 0.29 of its potential returns per unit of risk. Alight Inc is currently generating about 0.16 per unit of risk. If you would invest 1,474 in Driven Brands Holdings on August 28, 2024 and sell it today you would earn a total of 230.00 from holding Driven Brands Holdings or generate 15.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Driven Brands Holdings vs. Alight Inc
Performance |
| Timeline |
| Driven Brands Holdings |
| Alight Inc |
Driven Brands and Alight Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Driven Brands and Alight
The main advantage of trading using opposite Driven Brands and Alight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Driven Brands position performs unexpectedly, Alight 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 Alight will offset losses from the drop in Alight's long position.| Driven Brands vs. CarGurus | Driven Brands vs. KAR Auction Services | Driven Brands vs. Kingsway Financial Services | Driven Brands vs. Group 1 Automotive |
Check out your portfolio center.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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