Correlation Between Domino’s Pizza and Kingdee International

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

Diversification Opportunities for Domino’s Pizza and Kingdee International

0.41

Correlation Coefficient

Domino’s Pizza  Kingdee International

Very weak diversification

The 3 months correlation between Domino’s and Kingdee is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Group and Kingdee International Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingdee International and Domino’s 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 Kingdee International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingdee International has no effect on the direction of Domino’s Pizza i.e., Domino’s Pizza and Kingdee International go up and down completely randomly.

Pair Corralation between Domino’s Pizza and Kingdee International

Assuming the 90 days horizon Dominos Pizza Group is expected to under-perform the Kingdee International. In addition to that, Domino’s Pizza is 2.89 times more volatile than Kingdee International Software. It trades about -0.08 of its total potential returns per unit of risk. Kingdee International Software is currently generating about -0.16 per unit of volatility. If you would invest  119.00  in Kingdee International Software on October 25, 2024 and sell it today you would lose (9.00) from holding Kingdee International Software or give up 7.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.65%
Values	Daily Returns

Dominos Pizza Group  vs.  Kingdee International Software

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 latest fragile performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Kingdee International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingdee International Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Domino’s Pizza and Kingdee International

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

The idea behind Dominos Pizza Group and Kingdee International Software 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.