Correlation Between Dominos Pizza and TH International

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

Diversification Opportunities for Dominos Pizza and TH International

-0.2

Correlation Coefficient

Dominos Pizza  TH International

Good diversification

The 3 months correlation between Dominos and THCH is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Group and TH International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TH International 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 TH International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TH International has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and TH International go up and down completely randomly.

Pair Corralation between Dominos Pizza and TH International

Assuming the 90 days horizon Dominos Pizza Group is expected to generate 0.28 times more return on investment than TH International. However, Dominos Pizza Group is 3.54 times less risky than TH International. It trades about -0.02 of its potential returns per unit of risk. TH International Limited is currently generating about -0.05 per unit of risk. If you would invest  432.00  in Dominos Pizza Group on September 14, 2024 and sell it today you would lose (20.00) from holding Dominos Pizza Group or give up 4.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	44.58%
Values	Daily Returns

Dominos Pizza Group  vs.  TH International Limited

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.

TH International

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TH International Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, TH International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dominos Pizza and TH International

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

The idea behind Dominos Pizza Group and TH International Limited 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.