Correlation Between Group 1 and Driven Brands
Can any of the company-specific risk be diversified away by investing in both Group 1 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 Group 1 and Driven Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Group 1 Automotive and Driven Brands Holdings, you can compare the effects of market volatilities on Group 1 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 Group 1 with a short position of Driven Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and Driven Brands.
Diversification Opportunities for Group 1 and Driven Brands
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Group and Driven is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive 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 Group 1 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 Group 1 Automotive 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 Group 1 i.e., Group 1 and Driven Brands go up and down completely randomly.
Pair Corralation between Group 1 and Driven Brands
Considering the 90-day investment horizon Group 1 Automotive is expected to generate 1.17 times more return on investment than Driven Brands. However, Group 1 is 1.17 times more volatile than Driven Brands Holdings. It trades about 0.28 of its potential returns per unit of risk. Driven Brands Holdings is currently generating about 0.23 per unit of risk. If you would invest 34,888 in Group 1 Automotive on August 24, 2024 and sell it today you would earn a total of 5,978 from holding Group 1 Automotive or generate 17.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Group 1 Automotive vs. Driven Brands Holdings
Performance |
| Timeline |
| Group 1 Automotive |
| Driven Brands Holdings |
Group 1 and Driven Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Group 1 and Driven Brands
The main advantage of trading using opposite Group 1 and Driven Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 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.| Group 1 vs. Penske Automotive Group | Group 1 vs. Lithia Motors | Group 1 vs. AutoNation | Group 1 vs. Asbury Automotive Group |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |