Correlation Between Planet Fitness and Target Corp

Can any of the company-specific risk be diversified away by investing in both Planet Fitness and Target Corp 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 Target Corp 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 Target Corp, you can compare the effects of market volatilities on Planet Fitness and Target Corp 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 Target Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Planet Fitness and Target Corp.

Diversification Opportunities for Planet Fitness and Target Corp

-0.74

Correlation Coefficient

Planet Fitness  Target Corp

Pay attention - limited upside

The 3 months correlation between Planet and Target is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness Cl and Target Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Corp has no effect on the direction of Planet Fitness i.e., Planet Fitness and Target Corp go up and down completely randomly.

Pair Corralation between Planet Fitness and Target Corp

Assuming the 90 days trading horizon Planet Fitness Cl is expected to generate 0.8 times more return on investment than Target Corp. However, Planet Fitness Cl is 1.25 times less risky than Target Corp. It trades about 0.2 of its potential returns per unit of risk. Target Corp is currently generating about -0.03 per unit of risk. If you would invest  8,127  in Planet Fitness Cl on October 26, 2024 and sell it today you would earn a total of  2,469  from holding Planet Fitness Cl or generate 30.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	91.94%
Values	Daily Returns

Planet Fitness Cl  vs.  Target Corp

Planet Fitness Cl

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness Cl are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Planet Fitness unveiled solid returns over the last few months and may actually be approaching a breakup point.

Target Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Target Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Target Corp is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Planet Fitness and Target Corp

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

The idea behind Planet Fitness Cl and Target 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.