Correlation Between Domo and Global Business

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

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

Diversification Opportunities for Domo and Global Business

0.27

Correlation Coefficient

Domo  Global Business

Modest diversification

The 3 months correlation between Domo and Global is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Domo Inc and Global Business Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Business Travel and Domo 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 Domo Inc are associated (or correlated) with Global Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Business Travel has no effect on the direction of Domo i.e., Domo and Global Business go up and down completely randomly.

Pair Corralation between Domo and Global Business

Given the investment horizon of 90 days Domo Inc is expected to generate 1.05 times more return on investment than Global Business. However, Domo is 1.05 times more volatile than Global Business Travel. It trades about 0.32 of its potential returns per unit of risk. Global Business Travel is currently generating about 0.18 per unit of risk. If you would invest  742.00  in Domo Inc on August 11, 2024 and sell it today you would earn a total of  159.00  from holding Domo Inc or generate 21.43% return on investment over 90 days.

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

Domo Inc  vs.  Global Business Travel

Domo Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Domo Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Domo displayed solid returns over the last few months and may actually be approaching a breakup point.

Global Business Travel

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Business Travel are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Global Business reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Domo and Global Business

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

The idea behind Domo Inc and Global Business Travel 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.