Correlation Between SL Green and Dominos Pizza

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

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

Diversification Opportunities for SL Green and Dominos Pizza

0.61

Correlation Coefficient

SL Green  Dominos Pizza

Poor diversification

The 3 months correlation between SLG and Dominos is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and Dominos Pizza in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza and SL Green 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 SL Green Realty 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 SL Green i.e., SL Green and Dominos Pizza go up and down completely randomly.

Pair Corralation between SL Green and Dominos Pizza

Considering the 90-day investment horizon SL Green Realty is expected to generate 1.8 times more return on investment than Dominos Pizza. However, SL Green is 1.8 times more volatile than Dominos Pizza. It trades about 0.07 of its potential returns per unit of risk. Dominos Pizza is currently generating about 0.04 per unit of risk. If you would invest  2,915  in SL Green Realty on September 14, 2024 and sell it today you would earn a total of  4,443  from holding SL Green Realty or generate 152.42% return on investment over 90 days.

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

SL Green Realty  vs.  Dominos Pizza

SL Green Realty

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SL Green Realty are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, SL Green is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 unfluctuating basic indicators, Dominos Pizza showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SL Green and Dominos Pizza

The main advantage of trading using opposite SL Green and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SL Green 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 SL Green Realty 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 Global Correlations module to find global opportunities by holding instruments from different markets.