Correlation Between Driven Brands and Invesco Aerospace

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

Diversification Opportunities for Driven Brands and Invesco Aerospace

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Driven and Invesco is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Driven Brands Holdings and Invesco Aerospace Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Aerospace Defense 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 Invesco Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Aerospace Defense has no effect on the direction of Driven Brands i.e., Driven Brands and Invesco Aerospace go up and down completely randomly.

Pair Corralation between Driven Brands and Invesco Aerospace

Given the investment horizon of 90 days Driven Brands is expected to generate 1.07 times less return on investment than Invesco Aerospace. In addition to that, Driven Brands is 2.31 times more volatile than Invesco Aerospace Defense. It trades about 0.07 of its total potential returns per unit of risk. Invesco Aerospace Defense is currently generating about 0.17 per unit of volatility. If you would invest  10,423  in Invesco Aerospace Defense on July 11, 2024 and sell it today you would earn a total of  1,225  from holding Invesco Aerospace Defense or generate 11.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Driven Brands Holdings  vs.  Invesco Aerospace Defense

 Performance 
       Timeline  
Driven Brands Holdings 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Driven Brands Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Driven Brands may actually be approaching a critical reversion point that can send shares even higher in November 2024.
Invesco Aerospace Defense 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Aerospace Defense are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Invesco Aerospace may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Driven Brands and Invesco Aerospace Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Driven Brands and Invesco Aerospace

The main advantage of trading using opposite Driven Brands and Invesco Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Driven Brands position performs unexpectedly, Invesco Aerospace 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 Invesco Aerospace will offset losses from the drop in Invesco Aerospace's long position.
The idea behind Driven Brands Holdings and Invesco Aerospace Defense 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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