Correlation Between Stifel Financial and Dominos Pizza

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

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

Diversification Opportunities for Stifel Financial and Dominos Pizza

-0.39

Correlation Coefficient

Stifel Financial  Dominos Pizza

Very good diversification

The 3 months correlation between Stifel and Dominos is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Stifel Financial Corp and Dominos Pizza in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza and Stifel Financial 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 Stifel Financial Corp 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 Stifel Financial i.e., Stifel Financial and Dominos Pizza go up and down completely randomly.

Pair Corralation between Stifel Financial and Dominos Pizza

Assuming the 90 days horizon Stifel Financial is expected to generate 26.19 times less return on investment than Dominos Pizza. But when comparing it to its historical volatility, Stifel Financial Corp is 2.05 times less risky than Dominos Pizza. It trades about 0.01 of its potential returns per unit of risk. Dominos Pizza is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  40,402  in Dominos Pizza on September 4, 2024 and sell it today you would earn a total of  5,820  from holding Dominos Pizza or generate 14.41% return on investment over 90 days.

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

Stifel Financial Corp  vs.  Dominos Pizza

Stifel Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stifel Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Stifel Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Dominos Pizza

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza are ranked lower than 11 (%) 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.

Pair Trading with Stifel Financial and Dominos Pizza

The main advantage of trading using opposite Stifel Financial and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stifel Financial 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 Stifel Financial Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.