Correlation Between Revolution Beauty and Dominos Pizza

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

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

Diversification Opportunities for Revolution Beauty and Dominos Pizza

-0.85

Correlation Coefficient

Revolution Beauty  Dominos Pizza

Pay attention - limited upside

The 3 months correlation between Revolution and Dominos is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Beauty Group 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 Revolution Beauty 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 Revolution Beauty Group 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 Revolution Beauty i.e., Revolution Beauty and Dominos Pizza go up and down completely randomly.

Pair Corralation between Revolution Beauty and Dominos Pizza

Assuming the 90 days trading horizon Revolution Beauty Group is expected to under-perform the Dominos Pizza. In addition to that, Revolution Beauty is 2.1 times more volatile than Dominos Pizza Group. It trades about -0.13 of its total potential returns per unit of risk. Dominos Pizza Group is currently generating about 0.05 per unit of volatility. If you would invest  29,500  in Dominos Pizza Group on September 23, 2024 and sell it today you would earn a total of  1,380  from holding Dominos Pizza Group or generate 4.68% return on investment over 90 days.

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

Revolution Beauty Group  vs.  Dominos Pizza Group

Revolution Beauty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Revolution Beauty Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Dominos Pizza Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Revolution Beauty and Dominos Pizza

The main advantage of trading using opposite Revolution Beauty and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Revolution Beauty 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 Revolution Beauty Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.