Correlation Between Lindsell Train and Dominos Pizza

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Can any of the company-specific risk be diversified away by investing in both Lindsell Train 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 Lindsell Train and Dominos Pizza into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lindsell Train Investment and Dominos Pizza Group, you can compare the effects of market volatilities on Lindsell Train 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 Lindsell Train with a short position of Dominos Pizza. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lindsell Train and Dominos Pizza.

Diversification Opportunities for Lindsell Train and Dominos Pizza

-0.6
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Lindsell and Dominos is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment 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 Lindsell Train 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 Lindsell Train Investment 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 Lindsell Train i.e., Lindsell Train and Dominos Pizza go up and down completely randomly.

Pair Corralation between Lindsell Train and Dominos Pizza

Assuming the 90 days trading horizon Lindsell Train is expected to generate 1.63 times less return on investment than Dominos Pizza. But when comparing it to its historical volatility, Lindsell Train Investment is 1.08 times less risky than Dominos Pizza. It trades about 0.03 of its potential returns per unit of risk. Dominos Pizza Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  29,500  in Dominos Pizza Group on September 19, 2024 and sell it today you would earn a total of  1,240  from holding Dominos Pizza Group or generate 4.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy98.46%
ValuesDaily Returns

Lindsell Train Investment  vs.  Dominos Pizza Group

 Performance 
       Timeline  
Lindsell Train Investment 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Lindsell Train Investment 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, Lindsell Train is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
Dominos Pizza Group 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza Group are ranked lower than 3 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Lindsell Train and Dominos Pizza Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lindsell Train and Dominos Pizza

The main advantage of trading using opposite Lindsell Train and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lindsell Train 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 Lindsell Train Investment 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.
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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