Correlation Between Bloomin Brands and Dominos Pizza

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

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

Diversification Opportunities for Bloomin Brands and Dominos Pizza

-0.72

Correlation Coefficient

Bloomin Brands  Dominos Pizza

Pay attention - limited upside

The 3 months correlation between Bloomin and Dominos is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bloomin Brands and Dominos Pizza in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza and Bloomin 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 Bloomin Brands 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 Bloomin Brands i.e., Bloomin Brands and Dominos Pizza go up and down completely randomly.

Pair Corralation between Bloomin Brands and Dominos Pizza

Given the investment horizon of 90 days Bloomin Brands is expected to generate 2.15 times more return on investment than Dominos Pizza. However, Bloomin Brands is 2.15 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 -0.06 per unit of risk. If you would invest  1,233  in Bloomin Brands on September 20, 2024 and sell it today you would lose (41.00) from holding Bloomin Brands or give up 3.33% of portfolio value over 90 days.

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

Bloomin Brands  vs.  Dominos Pizza

Bloomin Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bloomin Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Dominos Pizza

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Dominos Pizza is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bloomin Brands and Dominos Pizza

The main advantage of trading using opposite Bloomin Brands and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bloomin Brands 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 Bloomin Brands 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.