Correlation Between Postal Realty and Dominos Pizza

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

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

Diversification Opportunities for Postal Realty and Dominos Pizza

-0.21

Correlation Coefficient

Postal Realty  Dominos Pizza

Very good diversification

The 3 months correlation between Postal and Dominos is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Postal Realty Trust and Dominos Pizza in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza and Postal Realty 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 Postal Realty 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 has no effect on the direction of Postal Realty i.e., Postal Realty and Dominos Pizza go up and down completely randomly.

Pair Corralation between Postal Realty and Dominos Pizza

Given the investment horizon of 90 days Postal Realty Trust is expected to under-perform the Dominos Pizza. But the stock apears to be less risky and, when comparing its historical volatility, Postal Realty Trust is 1.45 times less risky than Dominos Pizza. The stock trades about -0.01 of its potential returns per unit of risk. The Dominos Pizza is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  42,998  in Dominos Pizza on September 4, 2024 and sell it today you would earn a total of  3,620  from holding Dominos Pizza or generate 8.42% return on investment over 90 days.

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

Postal Realty Trust  vs.  Dominos Pizza

Postal Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Postal Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Postal Realty is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Dominos Pizza

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza are ranked lower than 11 (%) 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.

Pair Trading with Postal Realty and Dominos Pizza

The main advantage of trading using opposite Postal Realty and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Postal Realty 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 Postal Realty Trust and Dominos Pizza 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.