Correlation Between Chuys Holdings and Dominos Pizza

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

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

Diversification Opportunities for Chuys Holdings and Dominos Pizza

-0.83

Correlation Coefficient

Chuys Holdings  Dominos Pizza

Pay attention - limited upside

The 3 months correlation between Chuys and Dominos is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Chuys Holdings and Dominos Pizza in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza and Chuys Holdings 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 Chuys Holdings 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 Chuys Holdings i.e., Chuys Holdings and Dominos Pizza go up and down completely randomly.

Pair Corralation between Chuys Holdings and Dominos Pizza

Given the investment horizon of 90 days Chuys Holdings is expected to generate 1.13 times less return on investment than Dominos Pizza. In addition to that, Chuys Holdings is 1.18 times more volatile than Dominos Pizza. It trades about 0.04 of its total potential returns per unit of risk. Dominos Pizza is currently generating about 0.05 per unit of volatility. If you would invest  34,334  in Dominos Pizza on February 14, 2024 and sell it today you would earn a total of  16,690  from holding Dominos Pizza or generate 48.61% return on investment over 90 days.

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

Chuys Holdings  vs.  Dominos Pizza

Chuys Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chuys Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Dominos Pizza

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Dominos Pizza showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chuys Holdings and Dominos Pizza

The main advantage of trading using opposite Chuys Holdings and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chuys Holdings 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 Chuys Holdings 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.