Correlation Between Dominos Pizza and Cheesecake Factory
Can any of the company-specific risk be diversified away by investing in both Dominos Pizza and Cheesecake Factory 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 Dominos Pizza and Cheesecake Factory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dominos Pizza Group and The Cheesecake Factory, you can compare the effects of market volatilities on Dominos Pizza and Cheesecake Factory 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 Dominos Pizza with a short position of Cheesecake Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominos Pizza and Cheesecake Factory.
Diversification Opportunities for Dominos Pizza and Cheesecake Factory
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dominos and Cheesecake is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Group and The Cheesecake Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Cheesecake Factory and Dominos Pizza 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 Dominos Pizza Group are associated (or correlated) with Cheesecake Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Cheesecake Factory has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and Cheesecake Factory go up and down completely randomly.
Pair Corralation between Dominos Pizza and Cheesecake Factory
Assuming the 90 days horizon Dominos Pizza Group is expected to generate 1.26 times more return on investment than Cheesecake Factory. However, Dominos Pizza is 1.26 times more volatile than The Cheesecake Factory. It trades about 0.2 of its potential returns per unit of risk. The Cheesecake Factory is currently generating about 0.13 per unit of risk. If you would invest 782.00 in Dominos Pizza Group on September 13, 2024 and sell it today you would earn a total of 80.00 from holding Dominos Pizza Group or generate 10.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dominos Pizza Group vs. The Cheesecake Factory
Performance |
| Timeline |
| Dominos Pizza Group |
| The Cheesecake Factory |
Dominos Pizza and Cheesecake Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dominos Pizza and Cheesecake Factory
The main advantage of trading using opposite Dominos Pizza and Cheesecake Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dominos Pizza position performs unexpectedly, Cheesecake Factory 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 Cheesecake Factory will offset losses from the drop in Cheesecake Factory's long position.| Dominos Pizza vs. Jollibee Foods Corp | Dominos Pizza vs. Nathans Famous | Dominos Pizza vs. Good Times Restaurants | Dominos Pizza vs. Compass Group PLC |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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