Correlation Between GENERAL and Dominos Pizza

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

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

Diversification Opportunities for GENERAL and Dominos Pizza

-0.1

Correlation Coefficient

GENERAL  Dominos Pizza

Good diversification

The 3 months correlation between GENERAL and Dominos is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding GENERAL ELECTRIC CO 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 GENERAL 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 GENERAL ELECTRIC CO 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 GENERAL i.e., GENERAL and Dominos Pizza go up and down completely randomly.

Pair Corralation between GENERAL and Dominos Pizza

Assuming the 90 days trading horizon GENERAL ELECTRIC CO is expected to under-perform the Dominos Pizza. But the bond apears to be less risky and, when comparing its historical volatility, GENERAL ELECTRIC CO is 2.92 times less risky than Dominos Pizza. The bond trades about -0.05 of its potential returns per unit of risk. The Dominos Pizza Common is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  42,481  in Dominos Pizza Common on December 22, 2024 and sell it today you would earn a total of  3,659  from holding Dominos Pizza Common or generate 8.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	62.3%
Values	Daily Returns

GENERAL ELECTRIC CO  vs.  Dominos Pizza Common

GENERAL ELECTRIC

Risk-Adjusted Performance

Very Weak

Over the last 90 days GENERAL ELECTRIC CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Dominos Pizza Common

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza Common are ranked lower than 5 (%) 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 GENERAL and Dominos Pizza

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

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.