Correlation Between Trip Group and Planet Fitness

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

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

Diversification Opportunities for Trip Group and Planet Fitness

0.47

Correlation Coefficient

Trip Group  Planet Fitness

Very weak diversification

The 3 months correlation between Trip and Planet is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Trip Group Limited and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness and Trip Group 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 Trip Group Limited 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 Trip Group i.e., Trip Group and Planet Fitness go up and down completely randomly.

Pair Corralation between Trip Group and Planet Fitness

Assuming the 90 days horizon Trip Group Limited is expected to under-perform the Planet Fitness. But the stock apears to be less risky and, when comparing its historical volatility, Trip Group Limited is 1.14 times less risky than Planet Fitness. The stock trades about -0.33 of its potential returns per unit of risk. The Planet Fitness is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  9,650  in Planet Fitness on October 22, 2024 and sell it today you would earn a total of  450.00  from holding Planet Fitness or generate 4.66% return on investment over 90 days.

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

Trip Group Limited  vs.  Planet Fitness

Trip Group Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trip Group Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Trip Group reported solid returns over the last few months and may actually be approaching a breakup point.

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 fragile basic indicators, Planet Fitness reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trip Group and Planet Fitness

The main advantage of trading using opposite Trip Group and Planet Fitness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trip Group 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 Trip Group Limited 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.