Correlation Between Planet Fitness and Bausch Health

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

By analyzing existing cross correlation between Planet Fitness and Bausch Health Companies, you can compare the effects of market volatilities on Planet Fitness and Bausch 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 Bausch Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Planet Fitness and Bausch Health.

Diversification Opportunities for Planet Fitness and Bausch Health

-0.37

Correlation Coefficient

Planet Fitness  Bausch Health

Very good diversification

The 3 months correlation between Planet and Bausch is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Bausch Health Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bausch Health Companies 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 are associated (or correlated) with Bausch Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bausch Health Companies has no effect on the direction of Planet Fitness i.e., Planet Fitness and Bausch Health go up and down completely randomly.

Pair Corralation between Planet Fitness and Bausch Health

Assuming the 90 days horizon Planet Fitness is expected to generate 0.64 times more return on investment than Bausch Health. However, Planet Fitness is 1.57 times less risky than Bausch Health. It trades about 0.04 of its potential returns per unit of risk. Bausch Health Companies is currently generating about 0.02 per unit of risk. If you would invest  7,582  in Planet Fitness on October 23, 2024 and sell it today you would earn a total of  2,518  from holding Planet Fitness or generate 33.21% return on investment over 90 days.

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

Planet Fitness  vs.  Bausch Health Companies

Planet Fitness

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Planet Fitness reported solid returns over the last few months and may actually be approaching a breakup point.

Bausch Health Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bausch Health Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bausch Health is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Planet Fitness and Bausch Health

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

The idea behind Planet Fitness and Bausch Health Companies 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.