Correlation Between Dominos Pizza and Bluerock Homes

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

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

Diversification Opportunities for Dominos Pizza and Bluerock Homes

0.85

Correlation Coefficient

Dominos Pizza  Bluerock Homes

Very poor diversification

The 3 months correlation between Dominos and Bluerock is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza and Bluerock Homes Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluerock Homes Trust 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 Bluerock Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bluerock Homes Trust has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and Bluerock Homes go up and down completely randomly.

Pair Corralation between Dominos Pizza and Bluerock Homes

Considering the 90-day investment horizon Dominos Pizza is expected to generate 1.05 times more return on investment than Bluerock Homes. However, Dominos Pizza is 1.05 times more volatile than Bluerock Homes Trust. It trades about 0.18 of its potential returns per unit of risk. Bluerock Homes Trust is currently generating about 0.13 per unit of risk. If you would invest  45,587  in Dominos Pizza on February 20, 2024 and sell it today you would earn a total of  6,021  from holding Dominos Pizza or generate 13.21% return on investment over 90 days.

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

Dominos Pizza  vs.  Bluerock Homes Trust

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 weak basic indicators, Dominos Pizza showed solid returns over the last few months and may actually be approaching a breakup point.

Bluerock Homes Trust

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bluerock Homes Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical indicators, Bluerock Homes displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dominos Pizza and Bluerock Homes

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

The idea behind Dominos Pizza and Bluerock Homes Trust 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.