Correlation Between Dominos Pizza and Catalyst Metals

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

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

Diversification Opportunities for Dominos Pizza and Catalyst Metals

0.49

Correlation Coefficient

Dominos Pizza  Catalyst Metals

Very weak diversification

The 3 months correlation between Dominos and Catalyst is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza Common and Catalyst Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Metals 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 Common are associated (or correlated) with Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and Catalyst Metals go up and down completely randomly.

Pair Corralation between Dominos Pizza and Catalyst Metals

Considering the 90-day investment horizon Dominos Pizza is expected to generate 10.99 times less return on investment than Catalyst Metals. But when comparing it to its historical volatility, Dominos Pizza Common is 2.28 times less risky than Catalyst Metals. It trades about 0.06 of its potential returns per unit of risk. Catalyst Metals Limited is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  166.00  in Catalyst Metals Limited on January 8, 2025 and sell it today you would earn a total of  184.00  from holding Catalyst Metals Limited or generate 110.84% return on investment over 90 days.

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

Dominos Pizza Common  vs.  Catalyst Metals Limited

Dominos Pizza Common

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza Common are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Dominos Pizza may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Catalyst Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Metals Limited are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating primary indicators, Catalyst Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dominos Pizza and Catalyst Metals

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

The idea behind Dominos Pizza Common and Catalyst Metals Limited 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.