Correlation Between Stepstone and Dominos Pizza

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

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

Diversification Opportunities for Stepstone and Dominos Pizza

0.35

Correlation Coefficient

Stepstone  Dominos Pizza

Weak diversification

The 3 months correlation between Stepstone and Dominos is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Dominos Pizza Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza Common and Stepstone 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 Stepstone 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 Common has no effect on the direction of Stepstone i.e., Stepstone and Dominos Pizza go up and down completely randomly.

Pair Corralation between Stepstone and Dominos Pizza

Given the investment horizon of 90 days Stepstone Group is expected to generate 1.25 times more return on investment than Dominos Pizza. However, Stepstone is 1.25 times more volatile than Dominos Pizza Common. It trades about 0.1 of its potential returns per unit of risk. Dominos Pizza Common is currently generating about 0.05 per unit of risk. If you would invest  3,034  in Stepstone Group on December 2, 2024 and sell it today you would earn a total of  2,982  from holding Stepstone Group or generate 98.29% return on investment over 90 days.

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

Stepstone Group  vs.  Dominos Pizza Common

Stepstone Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stepstone Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Stepstone is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Dominos Pizza Common

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza Common are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Dominos Pizza may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Stepstone and Dominos Pizza

The main advantage of trading using opposite Stepstone and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone 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 Stepstone Group and Dominos Pizza Common 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.