Correlation Between GM and Domino’s Pizza
Can any of the company-specific risk be diversified away by investing in both GM and Domino’s 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 GM and Domino’s Pizza into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Dominos Pizza Group, you can compare the effects of market volatilities on GM and Domino’s 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 GM with a short position of Domino’s Pizza. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Domino’s Pizza.
Diversification Opportunities for GM and Domino’s Pizza
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Domino’s is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors are associated (or correlated) with Domino’s 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 GM i.e., GM and Domino’s Pizza go up and down completely randomly.
Pair Corralation between GM and Domino’s Pizza
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Domino’s Pizza. In addition to that, GM is 2.03 times more volatile than Dominos Pizza Group. It trades about -0.1 of its total potential returns per unit of risk. Dominos Pizza Group is currently generating about 0.18 per unit of volatility. If you would invest 712.00 in Dominos Pizza Group on December 4, 2024 and sell it today you would earn a total of 24.00 from holding Dominos Pizza Group or generate 3.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
General Motors vs. Dominos Pizza Group
Performance |
| Timeline |
| General Motors |
| Dominos Pizza Group |
GM and Domino’s Pizza Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Domino’s Pizza
The main advantage of trading using opposite GM and Domino’s Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Domino’s 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 Domino’s Pizza will offset losses from the drop in Domino’s Pizza's long position.The idea behind General Motors 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.| Domino’s Pizza vs. Direct Line Insurance | Domino’s Pizza vs. Molson Coors Brewing | Domino’s Pizza vs. Compania Cervecerias Unidas | Domino’s Pizza vs. Essent Group |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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