Correlation Between Dominos Pizza and FAT Brands
Can any of the company-specific risk be diversified away by investing in both Dominos Pizza and FAT Brands 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 FAT Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dominos Pizza and FAT Brands, you can compare the effects of market volatilities on Dominos Pizza and FAT Brands 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 FAT Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominos Pizza and FAT Brands.
Diversification Opportunities for Dominos Pizza and FAT Brands
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dominos and FAT is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands 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 FAT Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAT Brands has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and FAT Brands go up and down completely randomly.
Pair Corralation between Dominos Pizza and FAT Brands
Considering the 90-day investment horizon Dominos Pizza is expected to generate 1.35 times more return on investment than FAT Brands. However, Dominos Pizza is 1.35 times more volatile than FAT Brands. It trades about 0.38 of its potential returns per unit of risk. FAT Brands is currently generating about 0.16 per unit of risk. If you would invest 41,002 in Dominos Pizza on August 31, 2024 and sell it today you would earn a total of 6,232 from holding Dominos Pizza or generate 15.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dominos Pizza vs. FAT Brands
Performance |
| Timeline |
| Dominos Pizza |
| FAT Brands |
Dominos Pizza and FAT Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dominos Pizza and FAT Brands
The main advantage of trading using opposite Dominos Pizza and FAT Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dominos Pizza position performs unexpectedly, FAT Brands 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 FAT Brands will offset losses from the drop in FAT Brands' long position.| Dominos Pizza vs. Brinker International | Dominos Pizza vs. Jack In The | Dominos Pizza vs. The Wendys Co | Dominos Pizza vs. Wingstop |
| FAT Brands vs. FAT Brands | FAT Brands vs. Cannae Holdings | FAT Brands vs. Nathans Famous | FAT Brands vs. Dine Brands Global |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |