Correlation Between Driven Brands and Cars
Can any of the company-specific risk be diversified away by investing in both Driven Brands and Cars 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 Cars 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 Cars Inc, you can compare the effects of market volatilities on Driven Brands and Cars 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 Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Driven Brands and Cars.
Diversification Opportunities for Driven Brands and Cars
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Driven and Cars is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Driven Brands Holdings and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Driven Brands i.e., Driven Brands and Cars go up and down completely randomly.
Pair Corralation between Driven Brands and Cars
Given the investment horizon of 90 days Driven Brands Holdings is expected to under-perform the Cars. In addition to that, Driven Brands is 1.28 times more volatile than Cars Inc. It trades about -0.02 of its total potential returns per unit of risk. Cars Inc is currently generating about 0.04 per unit of volatility. If you would invest 1,462 in Cars Inc on August 24, 2024 and sell it today you would earn a total of 471.00 from holding Cars Inc or generate 32.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Driven Brands Holdings vs. Cars Inc
Performance |
| Timeline |
| Driven Brands Holdings |
| Cars Inc |
Driven Brands and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Driven Brands and Cars
The main advantage of trading using opposite Driven Brands and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Driven Brands position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| Driven Brands vs. CarGurus | Driven Brands vs. KAR Auction Services | Driven Brands vs. Kingsway Financial Services | Driven Brands vs. Group 1 Automotive |
| Cars vs. KAR Auction Services | Cars vs. Kingsway Financial Services | Cars vs. Driven Brands Holdings | Cars 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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