Correlation Between Herald Investment and Dominos Pizza

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

By analyzing existing cross correlation between Herald Investment Trust and Dominos Pizza Group, you can compare the effects of market volatilities on Herald Investment and Dominos Pizza 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 Herald Investment with a short position of Dominos Pizza. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herald Investment and Dominos Pizza.

Diversification Opportunities for Herald Investment and Dominos Pizza

-0.27

Correlation Coefficient

Herald Investment  Dominos Pizza

Very good diversification

The 3 months correlation between Herald and Dominos is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and Dominos Pizza Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza Group and Herald Investment 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 Herald Investment Trust are associated (or correlated) with Dominos Pizza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dominos Pizza Group has no effect on the direction of Herald Investment i.e., Herald Investment and Dominos Pizza go up and down completely randomly.

Pair Corralation between Herald Investment and Dominos Pizza

Assuming the 90 days trading horizon Herald Investment Trust is expected to generate 0.65 times more return on investment than Dominos Pizza. However, Herald Investment Trust is 1.54 times less risky than Dominos Pizza. It trades about -0.16 of its potential returns per unit of risk. Dominos Pizza Group is currently generating about -0.13 per unit of risk. If you would invest  242,500  in Herald Investment Trust on October 24, 2024 and sell it today you would lose (10,500) from holding Herald Investment Trust or give up 4.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Herald Investment Trust  vs.  Dominos Pizza Group

Herald Investment Trust

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Herald Investment Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Herald Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dominos Pizza Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Herald Investment and Dominos Pizza

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

The idea behind Herald Investment Trust and Dominos Pizza Group 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..