Correlation Between Dominos Pizza and Red Rock

Can any of the company-specific risk be diversified away by investing in both Dominos Pizza and Red Rock 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 Red Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dominos Pizza and Red Rock Resorts, you can compare the effects of market volatilities on Dominos Pizza and Red Rock 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 Red Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominos Pizza and Red Rock.

Diversification Opportunities for Dominos Pizza and Red Rock

0.45

Correlation Coefficient

Dominos Pizza  Red Rock

Very weak diversification

The 3 months correlation between Dominos and Red is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza and Red Rock Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Rock Resorts 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 Red Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Rock Resorts has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and Red Rock go up and down completely randomly.

Pair Corralation between Dominos Pizza and Red Rock

Considering the 90-day investment horizon Dominos Pizza is expected to generate 0.81 times more return on investment than Red Rock. However, Dominos Pizza is 1.24 times less risky than Red Rock. It trades about 0.04 of its potential returns per unit of risk. Red Rock Resorts is currently generating about -0.26 per unit of risk. If you would invest  50,586  in Dominos Pizza on February 3, 2024 and sell it today you would earn a total of  831.00  from holding Dominos Pizza or generate 1.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Dominos Pizza  vs.  Red Rock Resorts

Dominos Pizza

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Dominos Pizza showed solid returns over the last few months and may actually be approaching a breakup point.

Red Rock Resorts

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Red Rock Resorts are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Red Rock is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Dominos Pizza and Red Rock

The main advantage of trading using opposite Dominos Pizza and Red Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dominos Pizza position performs unexpectedly, Red Rock 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 Red Rock will offset losses from the drop in Red Rock's long position.

The idea behind Dominos Pizza and Red Rock Resorts 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.