Correlation Between Dominos Pizza and Sonder Holdings

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

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

Diversification Opportunities for Dominos Pizza and Sonder Holdings

-0.41

Correlation Coefficient

Dominos Pizza  Sonder Holdings

Very good diversification

The 3 months correlation between Dominos and Sonder is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza and Sonder Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonder Holdings 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 Sonder Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonder Holdings has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and Sonder Holdings go up and down completely randomly.

Pair Corralation between Dominos Pizza and Sonder Holdings

Considering the 90-day investment horizon Dominos Pizza is expected to generate 0.15 times more return on investment than Sonder Holdings. However, Dominos Pizza is 6.55 times less risky than Sonder Holdings. It trades about 0.13 of its potential returns per unit of risk. Sonder Holdings is currently generating about -0.04 per unit of risk. If you would invest  40,873  in Dominos Pizza on September 5, 2024 and sell it today you would earn a total of  5,349  from holding Dominos Pizza or generate 13.09% return on investment over 90 days.

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

Dominos Pizza  vs.  Sonder Holdings

Dominos Pizza

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Dominos Pizza showed solid returns over the last few months and may actually be approaching a breakup point.

Sonder Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonder Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Dominos Pizza and Sonder Holdings

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

The idea behind Dominos Pizza and Sonder Holdings 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.