Correlation Between Dominos Pizza and GEN Restaurant

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

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

Diversification Opportunities for Dominos Pizza and GEN Restaurant

0.65

Correlation Coefficient

Dominos Pizza  GEN Restaurant

Poor diversification

The 3 months correlation between Dominos and GEN is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza and GEN Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEN Restaurant Group 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 GEN Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEN Restaurant Group has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and GEN Restaurant go up and down completely randomly.

Pair Corralation between Dominos Pizza and GEN Restaurant

Considering the 90-day investment horizon Dominos Pizza is expected to generate 47.99 times less return on investment than GEN Restaurant. But when comparing it to its historical volatility, Dominos Pizza is 35.64 times less risky than GEN Restaurant. It trades about 0.05 of its potential returns per unit of risk. GEN Restaurant Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.00  in GEN Restaurant Group on February 16, 2024 and sell it today you would earn a total of  1,202  from holding GEN Restaurant Group or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	45.34%
Values	Daily Returns

Dominos Pizza  vs.  GEN Restaurant Group

Dominos Pizza

Risk-Adjusted Performance

16 of 100

Good

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.

GEN Restaurant Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GEN Restaurant Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, GEN Restaurant disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dominos Pizza and GEN Restaurant

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

The idea behind Dominos Pizza and GEN Restaurant 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.