Correlation Between SPDR SP and Driven Brands

Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SPDR SP and Driven Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPDR SP Kensho and Driven Brands Holdings, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of Driven Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Driven Brands.

Diversification Opportunities for SPDR SP and Driven Brands

0.9

Correlation Coefficient

SPDR SP  Driven Brands

Almost no diversification

The 3 months correlation between SPDR and Driven is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Kensho 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 SPDR SP 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 SPDR SP Kensho 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 SPDR SP i.e., SPDR SP and Driven Brands go up and down completely randomly.

Pair Corralation between SPDR SP and Driven Brands

Given the investment horizon of 90 days SPDR SP Kensho is expected to generate 0.88 times more return on investment than Driven Brands. However, SPDR SP Kensho is 1.14 times less risky than Driven Brands. It trades about 0.1 of its potential returns per unit of risk. Driven Brands Holdings is currently generating about 0.08 per unit of risk. If you would invest  5,561  in SPDR SP Kensho on September 12, 2024 and sell it today you would earn a total of  169.65  from holding SPDR SP Kensho or generate 3.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

SPDR SP Kensho  vs.  Driven Brands Holdings

SPDR SP Kensho

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Kensho are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward-looking signals, SPDR SP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Driven Brands Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Driven Brands Holdings are ranked lower than 14 (%) 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.

Pair Trading with SPDR SP and Driven Brands

The main advantage of trading using opposite SPDR SP and Driven Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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.

The idea behind SPDR SP Kensho and Driven Brands Holdings 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.