Correlation Between Spot Coffee and Dominos Pizza

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

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

Diversification Opportunities for Spot Coffee and Dominos Pizza

0.71

Correlation Coefficient

Spot Coffee  Dominos Pizza

Poor diversification

The 3 months correlation between Spot and Dominos is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Spot Coffee 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 Spot Coffee 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 Spot Coffee 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 Spot Coffee i.e., Spot Coffee and Dominos Pizza go up and down completely randomly.

Pair Corralation between Spot Coffee and Dominos Pizza

If you would invest  0.27  in Spot Coffee on September 1, 2024 and sell it today you would lose (0.07) from holding Spot Coffee or give up 25.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Spot Coffee  vs.  Dominos Pizza Group

Spot Coffee

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spot Coffee are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Spot Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with Spot Coffee and Dominos Pizza

The main advantage of trading using opposite Spot Coffee and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spot Coffee 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 Spot Coffee 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..