Correlation Between Dominos Pizza and Six Flags

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

Diversification Opportunities for Dominos Pizza and Six Flags

-0.22

Correlation Coefficient

Dominos Pizza  Six Flags

Very good diversification

The 3 months correlation between Dominos and Six is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Common and Six Flags Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Flags Entertainment 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 Six Flags. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Flags Entertainment has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and Six Flags go up and down completely randomly.

Pair Corralation between Dominos Pizza and Six Flags

Considering the 90-day investment horizon Dominos Pizza Common is expected to generate 0.74 times more return on investment than Six Flags. However, Dominos Pizza Common is 1.35 times less risky than Six Flags. It trades about 0.06 of its potential returns per unit of risk. Six Flags Entertainment is currently generating about -0.14 per unit of risk. If you would invest  42,590  in Dominos Pizza Common on December 19, 2024 and sell it today you would earn a total of  2,678  from holding Dominos Pizza Common or generate 6.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Dominos Pizza Common  vs.  Six Flags Entertainment

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 4 (%) 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 April 2025.

Six Flags Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Six Flags Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Dominos Pizza and Six Flags

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

The idea behind Dominos Pizza Common and Six Flags Entertainment 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.