Correlation Between Planet Fitness and CVS Health

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

By analyzing existing cross correlation between Planet Fitness Cl and CVS Health Corp, you can compare the effects of market volatilities on Planet Fitness and CVS Health 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 Planet Fitness with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Planet Fitness and CVS Health.

Diversification Opportunities for Planet Fitness and CVS Health

-0.21

Correlation Coefficient

Planet Fitness  CVS Health

Very good diversification

The 3 months correlation between Planet and CVS is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness Cl and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp and Planet Fitness 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 Planet Fitness Cl are associated (or correlated) with CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of Planet Fitness i.e., Planet Fitness and CVS Health go up and down completely randomly.

Pair Corralation between Planet Fitness and CVS Health

Assuming the 90 days trading horizon Planet Fitness Cl is expected to generate 0.89 times more return on investment than CVS Health. However, Planet Fitness Cl is 1.12 times less risky than CVS Health. It trades about 0.16 of its potential returns per unit of risk. CVS Health Corp is currently generating about 0.04 per unit of risk. If you would invest  7,971  in Planet Fitness Cl on September 3, 2024 and sell it today you would earn a total of  2,009  from holding Planet Fitness Cl or generate 25.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

Planet Fitness Cl  vs.  CVS Health Corp

Planet Fitness Cl

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness Cl are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Planet Fitness unveiled solid returns over the last few months and may actually be approaching a breakup point.

CVS Health Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, CVS Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Planet Fitness and CVS Health

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

The idea behind Planet Fitness Cl and CVS Health Corp 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.