Correlation Between Planet Fitness and Talanx AG

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

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

Diversification Opportunities for Planet Fitness and Talanx AG

0.85

Correlation Coefficient

Planet Fitness  Talanx AG

Very poor diversification

The 3 months correlation between Planet and Talanx is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG 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 Talanx AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talanx AG has no effect on the direction of Planet Fitness i.e., Planet Fitness and Talanx AG go up and down completely randomly.

Pair Corralation between Planet Fitness and Talanx AG

Assuming the 90 days horizon Planet Fitness is expected to generate 2.02 times more return on investment than Talanx AG. However, Planet Fitness is 2.02 times more volatile than Talanx AG. It trades about 0.23 of its potential returns per unit of risk. Talanx AG is currently generating about 0.17 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	98.33%
Values	Daily Returns

Planet Fitness  vs.  Talanx AG

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.

Talanx AG

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Talanx AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Planet Fitness and Talanx AG

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

The idea behind Planet Fitness and Talanx AG 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.