Correlation Between Domino’s Pizza and Noble Romans

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

Diversification Opportunities for Domino’s Pizza and Noble Romans

-0.64

Correlation Coefficient

Domino’s Pizza  Noble Romans

Excellent diversification

The 3 months correlation between Domino’s and Noble is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Group and Noble Romans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noble Romans 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 Noble Romans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noble Romans has no effect on the direction of Domino’s Pizza i.e., Domino’s Pizza and Noble Romans go up and down completely randomly.

Pair Corralation between Domino’s Pizza and Noble Romans

Assuming the 90 days horizon Domino’s Pizza is expected to generate 6.0 times less return on investment than Noble Romans. But when comparing it to its historical volatility, Dominos Pizza Group is 6.08 times less risky than Noble Romans. It trades about 0.01 of its potential returns per unit of risk. Noble Romans is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Noble Romans on December 22, 2024 and sell it today you would lose (8.00) from holding Noble Romans or give up 22.86% of portfolio value over 90 days.

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

Dominos Pizza Group  vs.  Noble Romans

Dominos Pizza Group

Risk-Adjusted Performance

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, Domino’s Pizza is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Noble Romans

Risk-Adjusted Performance

Very Weak

Over the last 90 days Noble Romans has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very uncertain basic indicators, Noble Romans may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Domino’s Pizza and Noble Romans

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

The idea behind Dominos Pizza Group and Noble Romans 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..