Correlation Between Dominos Pizza and PVH Corp

Can any of the company-specific risk be diversified away by investing in both Dominos Pizza and PVH Corp 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 PVH Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dominos Pizza and PVH Corp, you can compare the effects of market volatilities on Dominos Pizza and PVH Corp 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 PVH Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominos Pizza and PVH Corp.

Diversification Opportunities for Dominos Pizza and PVH Corp

0.86

Correlation Coefficient

Dominos Pizza  PVH Corp

Very poor diversification

The 3 months correlation between Dominos and PVH is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza and PVH Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVH Corp 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 are associated (or correlated) with PVH Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVH Corp has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and PVH Corp go up and down completely randomly.

Pair Corralation between Dominos Pizza and PVH Corp

Considering the 90-day investment horizon Dominos Pizza is expected to generate 1.16 times less return on investment than PVH Corp. But when comparing it to its historical volatility, Dominos Pizza is 1.14 times less risky than PVH Corp. It trades about 0.13 of its potential returns per unit of risk. PVH Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  9,680  in PVH Corp on September 5, 2024 and sell it today you would earn a total of  1,479  from holding PVH Corp or generate 15.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Dominos Pizza  vs.  PVH Corp

Dominos Pizza

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Dominos Pizza showed solid returns over the last few months and may actually be approaching a breakup point.

PVH Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PVH Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, PVH Corp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dominos Pizza and PVH Corp

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

The idea behind Dominos Pizza and PVH Corp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.