Correlation Between Dominos Pizza and Kenvue

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

Diversification Opportunities for Dominos Pizza and Kenvue

0.59

Correlation Coefficient

Dominos Pizza  Kenvue

Very weak diversification

The 3 months correlation between Dominos and Kenvue is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Common and Kenvue Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenvue Inc 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 Kenvue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenvue Inc has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and Kenvue go up and down completely randomly.

Pair Corralation between Dominos Pizza and Kenvue

Considering the 90-day investment horizon Dominos Pizza is expected to generate 3.58 times less return on investment than Kenvue. In addition to that, Dominos Pizza is 1.08 times more volatile than Kenvue Inc. It trades about 0.0 of its total potential returns per unit of risk. Kenvue Inc is currently generating about 0.02 per unit of volatility. If you would invest  2,041  in Kenvue Inc on October 9, 2024 and sell it today you would earn a total of  64.00  from holding Kenvue Inc or generate 3.14% 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.  Kenvue Inc

Dominos Pizza Common

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Dominos Pizza Common has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Dominos Pizza is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kenvue Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kenvue Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Kenvue is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dominos Pizza and Kenvue

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

The idea behind Dominos Pizza Common and Kenvue Inc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.