Correlation Between Biglari Holdings and Dominos Pizza

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

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

Diversification Opportunities for Biglari Holdings and Dominos Pizza

0.71

Correlation Coefficient

Biglari Holdings  Dominos Pizza

Poor diversification

The 3 months correlation between Biglari and Dominos is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Dominos Pizza in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza and Biglari Holdings 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 Biglari Holdings 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 has no effect on the direction of Biglari Holdings i.e., Biglari Holdings and Dominos Pizza go up and down completely randomly.

Pair Corralation between Biglari Holdings and Dominos Pizza

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 1.18 times more return on investment than Dominos Pizza. However, Biglari Holdings is 1.18 times more volatile than Dominos Pizza. It trades about 0.03 of its potential returns per unit of risk. Dominos Pizza is currently generating about -0.02 per unit of risk. If you would invest  19,844  in Biglari Holdings on September 3, 2024 and sell it today you would earn a total of  1,199  from holding Biglari Holdings or generate 6.04% return on investment over 90 days.

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

Biglari Holdings  vs.  Dominos Pizza

Biglari Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Dominos Pizza

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Dominos Pizza showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biglari Holdings and Dominos Pizza

The main advantage of trading using opposite Biglari Holdings and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biglari Holdings 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 Biglari Holdings and Dominos Pizza 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.