Correlation Between Planet Fitness and Simon Property

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

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

Diversification Opportunities for Planet Fitness and Simon Property

0.89

Correlation Coefficient

Planet Fitness  Simon Property

Very poor diversification

The 3 months correlation between Planet and Simon is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Simon Property Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simon Property Group 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 Simon Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simon Property Group has no effect on the direction of Planet Fitness i.e., Planet Fitness and Simon Property go up and down completely randomly.

Pair Corralation between Planet Fitness and Simon Property

Assuming the 90 days horizon Planet Fitness is expected to generate 1.99 times more return on investment than Simon Property. However, Planet Fitness is 1.99 times more volatile than Simon Property Group. It trades about 0.23 of its potential returns per unit of risk. Simon Property Group is currently generating about 0.08 per unit of risk. If you would invest  7,300  in Planet Fitness on October 24, 2024 and sell it today you would earn a total of  3,000  from holding Planet Fitness or generate 41.1% return on investment over 90 days.

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

Planet Fitness  vs.  Simon Property Group

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.

Simon Property Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Simon Property may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Planet Fitness and Simon Property

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

The idea behind Planet Fitness and Simon Property Group 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.