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 ELEC CAP 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

0.16

Correlation Coefficient

GENERAL  Dominos Pizza

Average diversification

The 3 months correlation between GENERAL and Dominos is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding GENERAL ELEC CAP 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 ELEC CAP 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 ELEC CAP is expected to generate 0.52 times more return on investment than Dominos Pizza. However, GENERAL ELEC CAP is 1.91 times less risky than Dominos Pizza. It trades about -0.16 of its potential returns per unit of risk. Dominos Pizza Common is currently generating about -0.11 per unit of risk. If you would invest  9,789  in GENERAL ELEC CAP on October 11, 2024 and sell it today you would lose (257.00) from holding GENERAL ELEC CAP or give up 2.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	46.34%
Values	Daily Returns

GENERAL ELEC CAP  vs.  Dominos Pizza Common

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for GENERAL ELEC CAP investors.

Dominos Pizza Common

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dominos Pizza Common 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 current stock price disturbance, may contribute to short-term losses for the investors.

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 ELEC CAP 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.