Correlation Between Dominos Pizza and Compass Group
Can any of the company-specific risk be diversified away by investing in both Dominos Pizza and Compass Group 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 Compass Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dominos Pizza and Compass Group PLC, you can compare the effects of market volatilities on Dominos Pizza and Compass Group 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 Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominos Pizza and Compass Group.
Diversification Opportunities for Dominos Pizza and Compass Group
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dominos and Compass is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Group PLC 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 are associated (or correlated) with Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and Compass Group go up and down completely randomly.
Pair Corralation between Dominos Pizza and Compass Group
Considering the 90-day investment horizon Dominos Pizza is expected to generate 1.75 times less return on investment than Compass Group. In addition to that, Dominos Pizza is 1.69 times more volatile than Compass Group PLC. It trades about 0.04 of its total potential returns per unit of risk. Compass Group PLC is currently generating about 0.11 per unit of volatility. If you would invest 2,613 in Compass Group PLC on September 14, 2024 and sell it today you would earn a total of 818.00 from holding Compass Group PLC or generate 31.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Dominos Pizza vs. Compass Group PLC
Performance |
| Timeline |
| Dominos Pizza |
| Compass Group PLC |
Dominos Pizza and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dominos Pizza and Compass Group
The main advantage of trading using opposite Dominos Pizza and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dominos Pizza position performs unexpectedly, Compass Group 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 Compass Group will offset losses from the drop in Compass Group's long position.The idea behind Dominos Pizza and Compass Group PLC 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.| Compass Group vs. Jollibee Foods Corp | Compass Group vs. Nathans Famous | Compass Group vs. Good Times Restaurants | Compass Group vs. Wingstop |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| CEOs Directory Screen CEOs from public companies around the world | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |