Correlation Between Driven Brands and Blue Bird

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

Diversification Opportunities for Driven Brands and Blue Bird

-0.8

Correlation Coefficient

Driven Brands  Blue Bird

Pay attention - limited upside

The 3 months correlation between Driven and Blue is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Driven Brands Holdings and Blue Bird Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Bird Corp 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 Blue Bird. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Bird Corp has no effect on the direction of Driven Brands i.e., Driven Brands and Blue Bird go up and down completely randomly.

Pair Corralation between Driven Brands and Blue Bird

Given the investment horizon of 90 days Driven Brands Holdings is expected to under-perform the Blue Bird. But the etf apears to be less risky and, when comparing its historical volatility, Driven Brands Holdings is 2.75 times less risky than Blue Bird. The etf trades about -0.14 of its potential returns per unit of risk. The Blue Bird Corp is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  3,667  in Blue Bird Corp on March 7, 2024 and sell it today you would earn a total of  1,750  from holding Blue Bird Corp or generate 47.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Driven Brands Holdings  vs.  Blue Bird Corp

Driven Brands Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Driven Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Blue Bird Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Bird Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental drivers, Blue Bird exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Driven Brands and Blue Bird

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

The idea behind Driven Brands Holdings and Blue Bird Corp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.