Correlation Between TH International and Dominos Pizza

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

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

Diversification Opportunities for TH International and Dominos Pizza

-0.2

Correlation Coefficient

TH International  Dominos Pizza

Good diversification

The 3 months correlation between THCH and Dominos is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding TH International Limited 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 TH International 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 TH International Limited 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 TH International i.e., TH International and Dominos Pizza go up and down completely randomly.

Pair Corralation between TH International and Dominos Pizza

Given the investment horizon of 90 days TH International Limited is expected to under-perform the Dominos Pizza. In addition to that, TH International is 3.54 times more volatile than Dominos Pizza Group. It trades about -0.05 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 14, 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 Against
Strength	Insignificant
Accuracy	44.58%
Values	Daily Returns

TH International Limited  vs.  Dominos Pizza Group

TH International

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TH International Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, TH International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 TH International and Dominos Pizza

The main advantage of trading using opposite TH International and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TH International 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 TH International Limited 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 Transaction History module to view history of all your transactions and understand their impact on performance.