Correlation Between Dominos Pizza and GCT Semiconductor

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

By analyzing existing cross correlation between Dominos Pizza and GCT Semiconductor Holding, you can compare the effects of market volatilities on Dominos Pizza and GCT Semiconductor 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 GCT Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominos Pizza and GCT Semiconductor.

Diversification Opportunities for Dominos Pizza and GCT Semiconductor

-0.3

Correlation Coefficient

Dominos Pizza  GCT Semiconductor

Very good diversification

The 3 months correlation between Dominos and GCT is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza and GCT Semiconductor Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCT Semiconductor Holding 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 are associated (or correlated) with GCT Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GCT Semiconductor Holding has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and GCT Semiconductor go up and down completely randomly.

Pair Corralation between Dominos Pizza and GCT Semiconductor

Considering the 90-day investment horizon Dominos Pizza is expected to generate 0.31 times more return on investment than GCT Semiconductor. However, Dominos Pizza is 3.22 times less risky than GCT Semiconductor. It trades about 0.14 of its potential returns per unit of risk. GCT Semiconductor Holding is currently generating about -0.01 per unit of risk. If you would invest  40,897  in Dominos Pizza on September 14, 2024 and sell it today you would earn a total of  5,592  from holding Dominos Pizza or generate 13.67% return on investment over 90 days.

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

Dominos Pizza  vs.  GCT Semiconductor Holding

Dominos Pizza

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Dominos Pizza showed solid returns over the last few months and may actually be approaching a breakup point.

GCT Semiconductor Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dominos Pizza and GCT Semiconductor

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

The idea behind Dominos Pizza and GCT Semiconductor Holding 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 Global Correlations module to find global opportunities by holding instruments from different markets.