Correlation Between Restaurant Brands and Dominos Pizza

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

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

Diversification Opportunities for Restaurant Brands and Dominos Pizza

-0.23

Correlation Coefficient

Restaurant Brands  Dominos Pizza

Very good diversification

The 3 months correlation between Restaurant and Dominos is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa and Dominos Pizza in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza and Restaurant Brands 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 Restaurant Brands International 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 has no effect on the direction of Restaurant Brands i.e., Restaurant Brands and Dominos Pizza go up and down completely randomly.

Pair Corralation between Restaurant Brands and Dominos Pizza

Considering the 90-day investment horizon Restaurant Brands International is expected to generate 0.96 times more return on investment than Dominos Pizza. However, Restaurant Brands International is 1.04 times less risky than Dominos Pizza. It trades about -0.22 of its potential returns per unit of risk. Dominos Pizza is currently generating about -0.33 per unit of risk. If you would invest  6,956  in Restaurant Brands International on September 28, 2024 and sell it today you would lose (372.00) from holding Restaurant Brands International or give up 5.35% of portfolio value over 90 days.

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

Restaurant Brands Internationa  vs.  Dominos Pizza

Restaurant Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Restaurant Brands International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Dominos Pizza

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Dominos Pizza is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Restaurant Brands and Dominos Pizza

The main advantage of trading using opposite Restaurant Brands and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant Brands 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 Restaurant Brands International and Dominos Pizza 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 Commodity Directory module to find actively traded commodities issued by global exchanges.