Correlation Between Penn National and Dominos Pizza

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

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

Diversification Opportunities for Penn National and Dominos Pizza

0.53

Correlation Coefficient

Penn National  Dominos Pizza

Very weak diversification

The 3 months correlation between Penn and Dominos is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Dominos Pizza Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza Common and Penn National 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 Penn National Gaming 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 Common has no effect on the direction of Penn National i.e., Penn National and Dominos Pizza go up and down completely randomly.

Pair Corralation between Penn National and Dominos Pizza

Given the investment horizon of 90 days Penn National Gaming is expected to under-perform the Dominos Pizza. In addition to that, Penn National is 1.79 times more volatile than Dominos Pizza Common. It trades about -0.02 of its total potential returns per unit of risk. Dominos Pizza Common is currently generating about 0.03 per unit of volatility. If you would invest  35,011  in Dominos Pizza Common on October 23, 2024 and sell it today you would earn a total of  8,604  from holding Dominos Pizza Common or generate 24.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Penn National Gaming  vs.  Dominos Pizza Common

Penn National Gaming

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Penn National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dominos Pizza Common

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza Common are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Penn National and Dominos Pizza

The main advantage of trading using opposite Penn National and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National 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 Penn National Gaming and Dominos Pizza Common 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 Stocks Directory module to find actively traded stocks across global markets.