Correlation Between Liberty Media and Domino’s Pizza

Can any of the company-specific risk be diversified away by investing in both Liberty Media and Domino’s Pizza 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 Liberty Media and Domino’s Pizza into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Liberty Media Corp and Dominos Pizza Group, you can compare the effects of market volatilities on Liberty Media and Domino’s Pizza 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 Liberty Media with a short position of Domino’s Pizza. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Media and Domino’s Pizza.

Diversification Opportunities for Liberty Media and Domino’s Pizza

0.06

Correlation Coefficient

Liberty Media  Domino’s Pizza

Significant diversification

The 3 months correlation between Liberty and Domino’s is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media Corp and Dominos Pizza Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza Group and Liberty Media 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 Liberty Media Corp are associated (or correlated) with Domino’s Pizza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dominos Pizza Group has no effect on the direction of Liberty Media i.e., Liberty Media and Domino’s Pizza go up and down completely randomly.

Pair Corralation between Liberty Media and Domino’s Pizza

Assuming the 90 days trading horizon Liberty Media Corp is expected to generate 1.01 times more return on investment than Domino’s Pizza. However, Liberty Media is 1.01 times more volatile than Dominos Pizza Group. It trades about -0.05 of its potential returns per unit of risk. Dominos Pizza Group is currently generating about -0.07 per unit of risk. If you would invest  8,505  in Liberty Media Corp on December 24, 2024 and sell it today you would lose (576.00) from holding Liberty Media Corp or give up 6.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Liberty Media Corp  vs.  Dominos Pizza Group

Liberty Media Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liberty Media Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Liberty Media is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Dominos Pizza Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dominos Pizza Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Liberty Media and Domino’s Pizza

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

The idea behind Liberty Media Corp and Dominos Pizza Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..