Correlation Between Allstate and Dominos Pizza

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

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

Diversification Opportunities for Allstate and Dominos Pizza

0.71

Correlation Coefficient

Allstate  Dominos Pizza

Poor diversification

The 3 months correlation between Allstate and Dominos is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate 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 Allstate 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 The Allstate are associated (or correlated) with Dominos 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 Allstate i.e., Allstate and Dominos Pizza go up and down completely randomly.

Pair Corralation between Allstate and Dominos Pizza

Considering the 90-day investment horizon The Allstate is expected to generate 0.58 times more return on investment than Dominos Pizza. However, The Allstate is 1.72 times less risky than Dominos Pizza. It trades about -0.28 of its potential returns per unit of risk. Dominos Pizza Group is currently generating about -0.34 per unit of risk. If you would invest  19,904  in The Allstate on October 9, 2024 and sell it today you would lose (1,313) from holding The Allstate or give up 6.6% of portfolio value over 90 days.

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

The Allstate  vs.  Dominos Pizza Group

Allstate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Allstate is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Dominos Pizza Group

Risk-Adjusted Performance

0 of 100

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 fairly strong forward-looking signals, Dominos Pizza is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Allstate and Dominos Pizza

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

The idea behind The Allstate 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.