Correlation Between Dominos Pizza and Cheesecake Factory

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

By analyzing existing cross correlation between Dominos Pizza Common and The Cheesecake Factory, you can compare the effects of market volatilities on Dominos Pizza and Cheesecake Factory 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 Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominos Pizza and Cheesecake Factory.

Diversification Opportunities for Dominos Pizza and Cheesecake Factory

0.53

Correlation Coefficient

Dominos Pizza  Cheesecake Factory

Very weak diversification

The 3 months correlation between Dominos and Cheesecake is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Common and The Cheesecake Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Cheesecake Factory 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 Common are associated (or correlated) with Cheesecake Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Cheesecake Factory has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and Cheesecake Factory go up and down completely randomly.

Pair Corralation between Dominos Pizza and Cheesecake Factory

Considering the 90-day investment horizon Dominos Pizza Common is expected to generate 0.73 times more return on investment than Cheesecake Factory. However, Dominos Pizza Common is 1.37 times less risky than Cheesecake Factory. It trades about 0.17 of its potential returns per unit of risk. The Cheesecake Factory is currently generating about -0.24 per unit of risk. If you would invest  45,585  in Dominos Pizza Common on December 4, 2024 and sell it today you would earn a total of  2,593  from holding Dominos Pizza Common or generate 5.69% return on investment over 90 days.

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

Dominos Pizza Common  vs.  The Cheesecake Factory

Dominos Pizza Common

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza Common are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Dominos Pizza is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

The Cheesecake Factory

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Cheesecake Factory are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, Cheesecake Factory is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dominos Pizza and Cheesecake Factory

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

The idea behind Dominos Pizza Common and The Cheesecake Factory 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.