Correlation Between Noodles and Dominos Pizza

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

By analyzing existing cross correlation between Noodles Company and Dominos Pizza Group, you can compare the effects of market volatilities on Noodles 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 Noodles with a short position of Dominos Pizza. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noodles and Dominos Pizza.

Diversification Opportunities for Noodles and Dominos Pizza

0.24

Correlation Coefficient

Noodles  Dominos Pizza

Modest diversification

The 3 months correlation between Noodles and Dominos is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Noodles Company 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 Noodles 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 Noodles Company 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 Noodles i.e., Noodles and Dominos Pizza go up and down completely randomly.

Pair Corralation between Noodles and Dominos Pizza

Given the investment horizon of 90 days Noodles Company is expected to under-perform the Dominos Pizza. In addition to that, Noodles is 3.47 times more volatile than Dominos Pizza Group. It trades about -0.1 of its total potential returns per unit of risk. Dominos Pizza Group is currently generating about -0.02 per unit of volatility. If you would invest  432.00  in Dominos Pizza Group on September 12, 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 Together
Strength	Very Weak
Accuracy	44.76%
Values	Daily Returns

Noodles Company  vs.  Dominos Pizza Group

Noodles Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Noodles Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Noodles and Dominos Pizza

The main advantage of trading using opposite Noodles and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Noodles 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 Noodles Company 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.