Correlation Between Royalty Management and Dominos Pizza

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

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

Diversification Opportunities for Royalty Management and Dominos Pizza

0.19

Correlation Coefficient

Royalty Management  Dominos Pizza

Average diversification

The 3 months correlation between Royalty and Dominos is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Royalty Management Holding and Dominos Pizza in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza and Royalty Management 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 Royalty Management Holding 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 Royalty Management i.e., Royalty Management and Dominos Pizza go up and down completely randomly.

Pair Corralation between Royalty Management and Dominos Pizza

Given the investment horizon of 90 days Royalty Management Holding is expected to under-perform the Dominos Pizza. In addition to that, Royalty Management is 4.48 times more volatile than Dominos Pizza. It trades about -0.03 of its total potential returns per unit of risk. Dominos Pizza is currently generating about 0.06 per unit of volatility. If you would invest  33,327  in Dominos Pizza on September 24, 2024 and sell it today you would earn a total of  9,291  from holding Dominos Pizza or generate 27.88% return on investment over 90 days.

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

Royalty Management Holding  vs.  Dominos Pizza

Royalty Management

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royalty Management Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Royalty Management displayed solid returns over the last few months and may actually be approaching a breakup point.

Dominos Pizza

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Dominos Pizza has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Dominos Pizza is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Royalty Management and Dominos Pizza

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

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.