Correlation Between Dominos Pizza and Domino’s Pizza

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

Diversification Opportunities for Dominos Pizza and Domino’s Pizza

0.73

Correlation Coefficient

Dominos Pizza  Domino’s Pizza

Poor diversification

The 3 months correlation between Dominos and Domino’s is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Common and Dominos Pizza Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza Group 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 Domino’s Pizza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dominos Pizza Group has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and Domino’s Pizza go up and down completely randomly.

Pair Corralation between Dominos Pizza and Domino’s Pizza

Considering the 90-day investment horizon Dominos Pizza Common is expected to generate 0.63 times more return on investment than Domino’s Pizza. However, Dominos Pizza Common is 1.6 times less risky than Domino’s Pizza. It trades about 0.05 of its potential returns per unit of risk. Dominos Pizza Group is currently generating about 0.01 per unit of risk. If you would invest  33,024  in Dominos Pizza Common on October 24, 2024 and sell it today you would earn a total of  10,959  from holding Dominos Pizza Common or generate 33.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	75.45%
Values	Daily Returns

Dominos Pizza Common  vs.  Dominos Pizza Group

Dominos Pizza Common

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza Common are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Dominos Pizza may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with Dominos Pizza and Domino’s Pizza

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

The idea behind Dominos Pizza Common and Dominos Pizza Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.