Correlation Between Dominos Pizza and AUTONATION

Can any of the company-specific risk be diversified away by investing in both Dominos Pizza and AUTONATION 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 AUTONATION 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 AUTONATION INC 38, you can compare the effects of market volatilities on Dominos Pizza and AUTONATION 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 AUTONATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominos Pizza and AUTONATION.

Diversification Opportunities for Dominos Pizza and AUTONATION

0.32

Correlation Coefficient

Dominos Pizza  AUTONATION

Weak diversification

The 3 months correlation between Dominos and AUTONATION is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Common and AUTONATION INC 38 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUTONATION INC 38 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 AUTONATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUTONATION INC 38 has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and AUTONATION go up and down completely randomly.

Pair Corralation between Dominos Pizza and AUTONATION

Considering the 90-day investment horizon Dominos Pizza Common is expected to generate 2.28 times more return on investment than AUTONATION. However, Dominos Pizza is 2.28 times more volatile than AUTONATION INC 38. It trades about 0.08 of its potential returns per unit of risk. AUTONATION INC 38 is currently generating about -0.2 per unit of risk. If you would invest  43,100  in Dominos Pizza Common on October 25, 2024 and sell it today you would earn a total of  1,112  from holding Dominos Pizza Common or generate 2.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	84.21%
Values	Daily Returns

Dominos Pizza Common  vs.  AUTONATION INC 38

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.

AUTONATION INC 38

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUTONATION INC 38 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AUTONATION is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dominos Pizza and AUTONATION

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

The idea behind Dominos Pizza Common and AUTONATION INC 38 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.