Correlation Between Dominos Pizza and Continental

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

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

Diversification Opportunities for Dominos Pizza and Continental

0.6

Correlation Coefficient

Dominos Pizza  Continental

Poor diversification

The 3 months correlation between Dominos and Continental is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Group and Continental AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental AG PK and Dominos Pizza 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 Dominos Pizza Group are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental AG PK has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and Continental go up and down completely randomly.

Pair Corralation between Dominos Pizza and Continental

Assuming the 90 days horizon Dominos Pizza Group is expected to generate 1.49 times more return on investment than Continental. However, Dominos Pizza is 1.49 times more volatile than Continental AG PK. It trades about 0.01 of its potential returns per unit of risk. Continental AG PK is currently generating about 0.0 per unit of risk. If you would invest  487.00  in Dominos Pizza Group on February 26, 2024 and sell it today you would lose (77.00) from holding Dominos Pizza Group or give up 15.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Dominos Pizza Group  vs.  Continental AG PK

Dominos Pizza Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dominos Pizza Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Continental AG PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Continental AG PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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.

Pair Trading with Dominos Pizza and Continental

The main advantage of trading using opposite Dominos Pizza and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dominos Pizza position performs unexpectedly, Continental 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 Continental will offset losses from the drop in Continental's long position.

The idea behind Dominos Pizza Group and Continental AG PK 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 Commodity Directory module to find actively traded commodities issued by global exchanges.