Correlation Between Planet Fitness and Morgan Stanley

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

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

Diversification Opportunities for Planet Fitness and Morgan Stanley

0.42

Correlation Coefficient

Planet Fitness  Morgan Stanley

Very weak diversification

The 3 months correlation between Planet and Morgan is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of Planet Fitness i.e., Planet Fitness and Morgan Stanley go up and down completely randomly.

Pair Corralation between Planet Fitness and Morgan Stanley

Assuming the 90 days horizon Planet Fitness is expected to generate 1.59 times less return on investment than Morgan Stanley. In addition to that, Planet Fitness is 1.35 times more volatile than Morgan Stanley. It trades about 0.03 of its total potential returns per unit of risk. Morgan Stanley is currently generating about 0.08 per unit of volatility. If you would invest  8,658  in Morgan Stanley on October 10, 2024 and sell it today you would earn a total of  3,602  from holding Morgan Stanley or generate 41.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	60.8%
Values	Daily Returns

Planet Fitness  vs.  Morgan Stanley

Planet Fitness

Risk-Adjusted Performance

14 of 100

Good

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

Morgan Stanley

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Planet Fitness and Morgan Stanley

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

The idea behind Planet Fitness and Morgan Stanley 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.