Correlation Between Dominos Pizza and Toro

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

Diversification Opportunities for Dominos Pizza and Toro

-0.78

Correlation Coefficient

Dominos Pizza  Toro

Pay attention - limited upside

The 3 months correlation between Dominos and Toro is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Group and Toro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro 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 Toro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toro has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and Toro go up and down completely randomly.

Pair Corralation between Dominos Pizza and Toro

Assuming the 90 days horizon Dominos Pizza Group is expected to generate 0.49 times more return on investment than Toro. However, Dominos Pizza Group is 2.04 times less risky than Toro. It trades about 0.01 of its potential returns per unit of risk. Toro is currently generating about -0.01 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	Weak
Accuracy	100.0%
Values	Daily Returns

Dominos Pizza Group  vs.  Toro

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.

Toro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Toro is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dominos Pizza and Toro

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

The idea behind Dominos Pizza Group and Toro 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.