Correlation Between Driven Brands and US Global

Can any of the company-specific risk be diversified away by investing in both Driven Brands and US Global 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 US Global 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 US Global Sea, you can compare the effects of market volatilities on Driven Brands and US Global 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 US Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Driven Brands and US Global.

Diversification Opportunities for Driven Brands and US Global

-0.67

Correlation Coefficient

Driven Brands  US Global

Excellent diversification

The 3 months correlation between Driven and SEA is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Driven Brands Holdings and US Global Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Global Sea 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 US Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Global Sea has no effect on the direction of Driven Brands i.e., Driven Brands and US Global go up and down completely randomly.

Pair Corralation between Driven Brands and US Global

Given the investment horizon of 90 days Driven Brands Holdings is expected to generate 1.78 times more return on investment than US Global. However, Driven Brands is 1.78 times more volatile than US Global Sea. It trades about 0.15 of its potential returns per unit of risk. US Global Sea is currently generating about -0.09 per unit of risk. If you would invest  1,407  in Driven Brands Holdings on September 2, 2024 and sell it today you would earn a total of  278.00  from holding Driven Brands Holdings or generate 19.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Driven Brands Holdings  vs.  US Global Sea

Driven Brands Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Driven Brands Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Driven Brands displayed solid returns over the last few months and may actually be approaching a breakup point.

US Global Sea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Global Sea has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Etf's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Driven Brands and US Global

The main advantage of trading using opposite Driven Brands and US Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Driven Brands position performs unexpectedly, US Global 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 US Global will offset losses from the drop in US Global's long position.

The idea behind Driven Brands Holdings and US Global Sea pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.