Correlation Between DHI and Domo

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

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

Diversification Opportunities for DHI and Domo

0.2

Correlation Coefficient

DHI  Domo

Modest diversification

The 3 months correlation between DHI and Domo is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding DHI Group and Domo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Domo Inc and DHI 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 DHI Group are associated (or correlated) with Domo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Domo Inc has no effect on the direction of DHI i.e., DHI and Domo go up and down completely randomly.

Pair Corralation between DHI and Domo

Considering the 90-day investment horizon DHI Group is expected to generate 2.22 times more return on investment than Domo. However, DHI is 2.22 times more volatile than Domo Inc. It trades about -0.09 of its potential returns per unit of risk. Domo Inc is currently generating about -0.3 per unit of risk. If you would invest  269.00  in DHI Group on December 4, 2024 and sell it today you would lose (34.00) from holding DHI Group or give up 12.64% of portfolio value over 90 days.

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

DHI Group  vs.  Domo Inc

DHI Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DHI Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical indicators, DHI showed solid returns over the last few months and may actually be approaching a breakup point.

Domo Inc

Risk-Adjusted Performance

Very Weak

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

Pair Trading with DHI and Domo

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

The idea behind DHI Group and Domo Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.