Correlation Between Driven Brands and UL Solutions

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

Diversification Opportunities for Driven Brands and UL Solutions

0.65

Correlation Coefficient

Driven Brands  UL Solutions

Poor diversification

The 3 months correlation between Driven and ULS is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Driven Brands Holdings and UL Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UL Solutions 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 UL Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UL Solutions has no effect on the direction of Driven Brands i.e., Driven Brands and UL Solutions go up and down completely randomly.

Pair Corralation between Driven Brands and UL Solutions

Given the investment horizon of 90 days Driven Brands is expected to generate 11.48 times less return on investment than UL Solutions. But when comparing it to its historical volatility, Driven Brands Holdings is 1.09 times less risky than UL Solutions. It trades about 0.02 of its potential returns per unit of risk. UL Solutions is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  5,828  in UL Solutions on May 1, 2025 and sell it today you would earn a total of  1,411  from holding UL Solutions or generate 24.21% return on investment over 90 days.

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

Driven Brands Holdings  vs.  UL Solutions

Driven Brands Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Driven Brands Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Driven Brands is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

UL Solutions

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UL Solutions are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, UL Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Driven Brands and UL Solutions

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

The idea behind Driven Brands Holdings and UL Solutions 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.