Correlation Between IShares Aerospace and Driven Brands
Can any of the company-specific risk be diversified away by investing in both IShares Aerospace 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 Aerospace 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 Aerospace Defense and Driven Brands Holdings, you can compare the effects of market volatilities on IShares Aerospace 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 Aerospace with a short position of Driven Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Aerospace and Driven Brands.
Diversification Opportunities for IShares Aerospace and Driven Brands
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and Driven is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding iShares Aerospace Defense 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 Aerospace 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 Aerospace Defense 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 Aerospace i.e., IShares Aerospace and Driven Brands go up and down completely randomly.
Pair Corralation between IShares Aerospace and Driven Brands
Considering the 90-day investment horizon IShares Aerospace is expected to generate 3.4 times less return on investment than Driven Brands. But when comparing it to its historical volatility, iShares Aerospace Defense is 1.97 times less risky than Driven Brands. It trades about 0.09 of its potential returns per unit of risk. Driven Brands Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,121 in Driven Brands Holdings on September 5, 2024 and sell it today you would earn a total of 566.00 from holding Driven Brands Holdings or generate 50.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
iShares Aerospace Defense vs. Driven Brands Holdings
Performance |
| Timeline |
| iShares Aerospace Defense |
| Driven Brands Holdings |
IShares Aerospace and Driven Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Aerospace and Driven Brands
The main advantage of trading using opposite IShares Aerospace and Driven Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Aerospace 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.| IShares Aerospace vs. Driven Brands Holdings | IShares Aerospace vs. Vanguard Industrials Index | IShares Aerospace vs. First Trust IndustrialsProducer |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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