Correlation Between Hertz Global and Dominos Pizza

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

By analyzing existing cross correlation between Hertz Global Holdings and Dominos Pizza, you can compare the effects of market volatilities on Hertz Global 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 Hertz Global with a short position of Dominos Pizza. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hertz Global and Dominos Pizza.

Diversification Opportunities for Hertz Global and Dominos Pizza

0.83

Correlation Coefficient

Hertz Global  Dominos Pizza

Very poor diversification

The 3 months correlation between Hertz and Dominos is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings and Dominos Pizza in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza and Hertz Global 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 Hertz Global Holdings 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 Hertz Global i.e., Hertz Global and Dominos Pizza go up and down completely randomly.

Pair Corralation between Hertz Global and Dominos Pizza

Considering the 90-day investment horizon Hertz Global Holdings is expected to under-perform the Dominos Pizza. In addition to that, Hertz Global is 3.25 times more volatile than Dominos Pizza. It trades about -0.35 of its total potential returns per unit of risk. Dominos Pizza is currently generating about -0.39 per unit of volatility. If you would invest  47,464  in Dominos Pizza on September 30, 2024 and sell it today you would lose (4,502) from holding Dominos Pizza or give up 9.49% of portfolio value over 90 days.

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

Hertz Global Holdings  vs.  Dominos Pizza

Hertz Global Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hertz Global showed solid returns over the last few months and may actually be approaching a breakup point.

Dominos Pizza

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dominos Pizza has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Dominos Pizza is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hertz Global and Dominos Pizza

The main advantage of trading using opposite Hertz Global and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hertz Global 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.

The idea behind Hertz Global Holdings and Dominos Pizza 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.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.