Correlation Between Capital Drilling and Dominos Pizza

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

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

Diversification Opportunities for Capital Drilling and Dominos Pizza

-0.11

Correlation Coefficient

Capital Drilling  Dominos Pizza

Good diversification

The 3 months correlation between Capital and Dominos is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Capital Drilling and Dominos Pizza Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza Group and Capital Drilling 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 Capital Drilling 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 Group has no effect on the direction of Capital Drilling i.e., Capital Drilling and Dominos Pizza go up and down completely randomly.

Pair Corralation between Capital Drilling and Dominos Pizza

Assuming the 90 days trading horizon Capital Drilling is expected to generate 2.11 times less return on investment than Dominos Pizza. In addition to that, Capital Drilling is 1.1 times more volatile than Dominos Pizza Group. It trades about 0.01 of its total potential returns per unit of risk. Dominos Pizza Group is currently generating about 0.03 per unit of volatility. If you would invest  30,300  in Dominos Pizza Group on September 24, 2024 and sell it today you would earn a total of  640.00  from holding Dominos Pizza Group or generate 2.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Capital Drilling  vs.  Dominos Pizza Group

Capital Drilling

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Capital Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Capital Drilling is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Dominos Pizza Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Dominos Pizza is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Capital Drilling and Dominos Pizza

The main advantage of trading using opposite Capital Drilling and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Drilling 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 Capital Drilling and Dominos Pizza Group 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.