Correlation Between Planet Fitness and Oriental Land

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

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

Diversification Opportunities for Planet Fitness and Oriental Land

-0.63

Correlation Coefficient

Planet Fitness  Oriental Land

Excellent diversification

The 3 months correlation between Planet and Oriental is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Oriental Land Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Land 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 Oriental Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Land has no effect on the direction of Planet Fitness i.e., Planet Fitness and Oriental Land go up and down completely randomly.

Pair Corralation between Planet Fitness and Oriental Land

Assuming the 90 days horizon Planet Fitness is expected to generate 1.86 times less return on investment than Oriental Land. But when comparing it to its historical volatility, Planet Fitness is 1.34 times less risky than Oriental Land. It trades about 0.04 of its potential returns per unit of risk. Oriental Land Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,110  in Oriental Land Co on October 24, 2024 and sell it today you would earn a total of  930.00  from holding Oriental Land Co or generate 83.78% return on investment over 90 days.

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

Planet Fitness  vs.  Oriental Land Co

Planet Fitness

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 18 (%) 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.

Oriental Land

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Planet Fitness and Oriental Land

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

The idea behind Planet Fitness and Oriental Land Co 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.