Correlation Between Driven Brands and NATO
Can any of the company-specific risk be diversified away by investing in both Driven Brands and NATO 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 NATO 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 NATO, you can compare the effects of market volatilities on Driven Brands and NATO 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 NATO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Driven Brands and NATO.
Diversification Opportunities for Driven Brands and NATO
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Driven and NATO is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Driven Brands Holdings and NATO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATO 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 NATO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATO has no effect on the direction of Driven Brands i.e., Driven Brands and NATO go up and down completely randomly.
Pair Corralation between Driven Brands and NATO
Given the investment horizon of 90 days Driven Brands Holdings is expected to generate 1.91 times more return on investment than NATO. However, Driven Brands is 1.91 times more volatile than NATO. It trades about 0.15 of its potential returns per unit of risk. NATO is currently generating about 0.05 per unit of risk. If you would invest 1,140 in Driven Brands Holdings on September 15, 2024 and sell it today you would earn a total of 534.00 from holding Driven Brands Holdings or generate 46.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 35.71% |
| Values | Daily Returns |
Driven Brands Holdings vs. NATO
Performance |
| Timeline |
| Driven Brands Holdings |
| NATO |
Driven Brands and NATO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Driven Brands and NATO
The main advantage of trading using opposite Driven Brands and NATO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Driven Brands position performs unexpectedly, NATO 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 NATO will offset losses from the drop in NATO'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 |
| NATO vs. Invesco DWA Utilities | NATO vs. Invesco Dynamic Food | NATO vs. SCOR PK | NATO vs. Morningstar Unconstrained Allocation |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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