Correlation Between United Fire and Dominos Pizza
Can any of the company-specific risk be diversified away by investing in both United Fire 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 United Fire and Dominos Pizza into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Fire Group and Dominos Pizza, you can compare the effects of market volatilities on United Fire 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 United Fire with a short position of Dominos Pizza. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Dominos Pizza.
Diversification Opportunities for United Fire and Dominos Pizza
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Dominos is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Dominos Pizza in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza and United Fire 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 United Fire Group 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 has no effect on the direction of United Fire i.e., United Fire and Dominos Pizza go up and down completely randomly.
Pair Corralation between United Fire and Dominos Pizza
Given the investment horizon of 90 days United Fire is expected to generate 1.27 times less return on investment than Dominos Pizza. In addition to that, United Fire is 1.39 times more volatile than Dominos Pizza. It trades about 0.05 of its total potential returns per unit of risk. Dominos Pizza is currently generating about 0.08 per unit of volatility. If you would invest 29,396 in Dominos Pizza on August 31, 2024 and sell it today you would earn a total of 18,223 from holding Dominos Pizza or generate 61.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Fire Group vs. Dominos Pizza
Performance |
| Timeline |
| United Fire Group |
| Dominos Pizza |
United Fire and Dominos Pizza Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Fire and Dominos Pizza
The main advantage of trading using opposite United Fire and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire 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.| United Fire vs. Donegal Group B | United Fire vs. Horace Mann Educators | United Fire vs. Donegal Group A | United Fire vs. Global Indemnity PLC |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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