Correlation Between Ark Restaurants and Domino’s Pizza

Can any of the company-specific risk be diversified away by investing in both Ark Restaurants 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 Ark Restaurants 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 Ark Restaurants Corp and Dominos Pizza Group, you can compare the effects of market volatilities on Ark Restaurants 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 Ark Restaurants with a short position of Domino’s Pizza. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ark Restaurants and Domino’s Pizza.

Diversification Opportunities for Ark Restaurants and Domino’s Pizza

0.05

Correlation Coefficient

Ark Restaurants  Domino’s Pizza

Significant diversification

The 3 months correlation between Ark and Domino’s is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ark Restaurants 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 Ark Restaurants 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 Ark Restaurants 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 Ark Restaurants i.e., Ark Restaurants and Domino’s Pizza go up and down completely randomly.

Pair Corralation between Ark Restaurants and Domino’s Pizza

Given the investment horizon of 90 days Ark Restaurants Corp is expected to under-perform the Domino’s Pizza. But the stock apears to be less risky and, when comparing its historical volatility, Ark Restaurants Corp is 1.17 times less risky than Domino’s Pizza. The stock trades about 0.0 of its potential returns per unit of risk. The Dominos Pizza Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  802.00  in Dominos Pizza Group on October 6, 2024 and sell it today you would lose (12.00) from holding Dominos Pizza Group or give up 1.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.98%
Values	Daily Returns

Ark Restaurants Corp  vs.  Dominos Pizza Group

Ark Restaurants Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ark Restaurants Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward-looking signals, Ark Restaurants reported solid returns over the last few months and may actually be approaching a breakup point.

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, Domino’s Pizza is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ark Restaurants and Domino’s Pizza

The main advantage of trading using opposite Ark Restaurants and Domino’s Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ark Restaurants 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 Ark Restaurants 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.