Correlation Between Dominos Pizza and MTN Group

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

Diversification Opportunities for Dominos Pizza and MTN Group

-0.52

Correlation Coefficient

Dominos Pizza  MTN Group

Excellent diversification

The 3 months correlation between Dominos and MTN is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Common and MTN Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group Limited 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 MTN Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTN Group Limited has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and MTN Group go up and down completely randomly.

Pair Corralation between Dominos Pizza and MTN Group

Considering the 90-day investment horizon Dominos Pizza is expected to generate 2.9 times less return on investment than MTN Group. But when comparing it to its historical volatility, Dominos Pizza Common is 1.15 times less risky than MTN Group. It trades about 0.09 of its potential returns per unit of risk. MTN Group Limited is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  448.00  in MTN Group Limited on October 24, 2024 and sell it today you would earn a total of  42.00  from holding MTN Group Limited or generate 9.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Dominos Pizza Common  vs.  MTN Group Limited

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.

MTN Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTN Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Dominos Pizza and MTN Group

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

The idea behind Dominos Pizza Common and MTN Group Limited 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .