Correlation Between BP PLC and Planet Fitness

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

By analyzing existing cross correlation between BP PLC DZ1 and Planet Fitness, you can compare the effects of market volatilities on BP PLC and Planet Fitness 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 BP PLC with a short position of Planet Fitness. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP PLC and Planet Fitness.

Diversification Opportunities for BP PLC and Planet Fitness

0.09

Correlation Coefficient

BP PLC  Planet Fitness

Significant diversification

The 3 months correlation between BPE and Planet is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding BP PLC DZ1 and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness and BP PLC 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 BP PLC DZ1 are associated (or correlated) with Planet Fitness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planet Fitness has no effect on the direction of BP PLC i.e., BP PLC and Planet Fitness go up and down completely randomly.

Pair Corralation between BP PLC and Planet Fitness

Assuming the 90 days horizon BP PLC DZ1 is expected to generate 1.88 times more return on investment than Planet Fitness. However, BP PLC is 1.88 times more volatile than Planet Fitness. It trades about 0.28 of its potential returns per unit of risk. Planet Fitness is currently generating about 0.17 per unit of risk. If you would invest  442.00  in BP PLC DZ1 on October 23, 2024 and sell it today you would earn a total of  66.00  from holding BP PLC DZ1 or generate 14.93% return on investment over 90 days.

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

BP PLC DZ1  vs.  Planet Fitness

BP PLC DZ1

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BP PLC DZ1 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BP PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with BP PLC and Planet Fitness

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

The idea behind BP PLC DZ1 and Planet Fitness 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.