Correlation Between Dominos Pizza and E Home

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

Diversification Opportunities for Dominos Pizza and E Home

-0.5

Correlation Coefficient

Dominos Pizza  E Home

Very good diversification

The 3 months correlation between Dominos and EJH is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Common and E Home Household Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Home Household 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 E Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Home Household has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and E Home go up and down completely randomly.

Pair Corralation between Dominos Pizza and E Home

Considering the 90-day investment horizon Dominos Pizza Common is expected to under-perform the E Home. But the stock apears to be less risky and, when comparing its historical volatility, Dominos Pizza Common is 7.35 times less risky than E Home. The stock trades about -0.18 of its potential returns per unit of risk. The E Home Household Service is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  74.00  in E Home Household Service on October 6, 2024 and sell it today you would earn a total of  4.00  from holding E Home Household Service or generate 5.41% return on investment over 90 days.

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

Dominos Pizza Common  vs.  E Home Household Service

Dominos Pizza Common

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza Common are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Dominos Pizza may actually be approaching a critical reversion point that can send shares even higher in February 2025.

E Home Household

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Home Household Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Dominos Pizza and E Home

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

The idea behind Dominos Pizza Common and E Home Household Service 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.