Correlation Between Dominos Pizza and Marstons PLC

Can any of the company-specific risk be diversified away by investing in both Dominos Pizza and Marstons PLC 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 Marstons PLC 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 Marstons PLC, you can compare the effects of market volatilities on Dominos Pizza and Marstons PLC 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 Marstons PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominos Pizza and Marstons PLC.

Diversification Opportunities for Dominos Pizza and Marstons PLC

0.01

Correlation Coefficient

Dominos Pizza  Marstons PLC

Significant diversification

The 3 months correlation between Dominos and Marstons is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Group and Marstons PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marstons PLC 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 Marstons PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marstons PLC has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and Marstons PLC go up and down completely randomly.

Pair Corralation between Dominos Pizza and Marstons PLC

Assuming the 90 days horizon Dominos Pizza Group is expected to generate 1.51 times more return on investment than Marstons PLC. However, Dominos Pizza is 1.51 times more volatile than Marstons PLC. It trades about 0.04 of its potential returns per unit of risk. Marstons PLC is currently generating about 0.02 per unit of risk. If you would invest  346.00  in Dominos Pizza Group on September 1, 2024 and sell it today you would earn a total of  66.00  from holding Dominos Pizza Group or generate 19.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	54.23%
Values	Daily Returns

Dominos Pizza Group  vs.  Marstons PLC

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 nearly stable basic indicators, Dominos Pizza is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Marstons PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marstons PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Marstons PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dominos Pizza and Marstons PLC

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

The idea behind Dominos Pizza Group and Marstons PLC 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.