Correlation Between Dominos Pizza and Afya

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

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

Diversification Opportunities for Dominos Pizza and Afya

-0.1

Correlation Coefficient

Dominos Pizza  Afya

Good diversification

The 3 months correlation between Dominos and Afya is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Group and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya and Dominos Pizza 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 Dominos Pizza Group are associated (or correlated) with Afya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afya has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and Afya go up and down completely randomly.

Pair Corralation between Dominos Pizza and Afya

Assuming the 90 days horizon Dominos Pizza Group is expected to generate 1.18 times more return on investment than Afya. However, Dominos Pizza is 1.18 times more volatile than Afya. It trades about 0.01 of its potential returns per unit of risk. Afya is currently generating about -0.04 per unit of risk. If you would invest  734.00  in Dominos Pizza Group on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Dominos Pizza Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Dominos Pizza Group  vs.  Afya

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 current stock price disturbance, may contribute to short-term losses for the investors.

Afya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Afya is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dominos Pizza and Afya

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

The idea behind Dominos Pizza Group and Afya 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.