Correlation Between Primary Health and Dominos Pizza

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

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

Diversification Opportunities for Primary Health and Dominos Pizza

-0.29

Correlation Coefficient

Primary Health  Dominos Pizza

Very good diversification

The 3 months correlation between Primary and Dominos is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Primary Health Properties 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 Primary Health 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 Primary Health Properties 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 Primary Health i.e., Primary Health and Dominos Pizza go up and down completely randomly.

Pair Corralation between Primary Health and Dominos Pizza

Assuming the 90 days trading horizon Primary Health Properties is expected to generate 0.59 times more return on investment than Dominos Pizza. However, Primary Health Properties is 1.69 times less risky than Dominos Pizza. It trades about -0.17 of its potential returns per unit of risk. Dominos Pizza Group is currently generating about -0.23 per unit of risk. If you would invest  9,560  in Primary Health Properties on October 11, 2024 and sell it today you would lose (710.00) from holding Primary Health Properties or give up 7.43% of portfolio value over 90 days.

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

Primary Health Properties  vs.  Dominos Pizza Group

Primary Health Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Primary Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Primary Health and Dominos Pizza

The main advantage of trading using opposite Primary Health and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primary Health 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 Primary Health Properties 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.