Correlation Between Lithia Motors and Dominos Pizza
Can any of the company-specific risk be diversified away by investing in both Lithia Motors 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 Lithia Motors and Dominos Pizza into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithia Motors and Dominos Pizza Common, you can compare the effects of market volatilities on Lithia Motors 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 Lithia Motors with a short position of Dominos Pizza. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and Dominos Pizza.
Diversification Opportunities for Lithia Motors and Dominos Pizza
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lithia and Dominos is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and Dominos Pizza Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza Common and Lithia Motors 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 Lithia Motors 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 Common has no effect on the direction of Lithia Motors i.e., Lithia Motors and Dominos Pizza go up and down completely randomly.
Pair Corralation between Lithia Motors and Dominos Pizza
Considering the 90-day investment horizon Lithia Motors is expected to generate 1.15 times less return on investment than Dominos Pizza. But when comparing it to its historical volatility, Lithia Motors is 1.08 times less risky than Dominos Pizza. It trades about 0.07 of its potential returns per unit of risk. Dominos Pizza Common is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 41,376 in Dominos Pizza Common on October 24, 2024 and sell it today you would earn a total of 2,704 from holding Dominos Pizza Common or generate 6.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithia Motors vs. Dominos Pizza Common
Performance |
| Timeline |
| Lithia Motors |
| Dominos Pizza Common |
Lithia Motors and Dominos Pizza Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithia Motors and Dominos Pizza
The main advantage of trading using opposite Lithia Motors and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors 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.| Lithia Motors vs. Sonic Automotive | Lithia Motors vs. AutoNation | Lithia Motors vs. Asbury Automotive Group | Lithia Motors vs. Penske Automotive Group |
| Dominos Pizza vs. Brinker International | Dominos Pizza vs. Jack In The | Dominos Pizza vs. The Wendys Co | Dominos Pizza 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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