Correlation Between Smart Share and Planet Fitness

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

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

Diversification Opportunities for Smart Share and Planet Fitness

0.09

Correlation Coefficient

Smart Share  Planet Fitness

Significant diversification

The 3 months correlation between Smart and Planet is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Smart Share Global and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness and Smart Share 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 Smart Share Global 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 Smart Share i.e., Smart Share and Planet Fitness go up and down completely randomly.

Pair Corralation between Smart Share and Planet Fitness

Allowing for the 90-day total investment horizon Smart Share Global is expected to generate 2.46 times more return on investment than Planet Fitness. However, Smart Share is 2.46 times more volatile than Planet Fitness. It trades about 0.16 of its potential returns per unit of risk. Planet Fitness is currently generating about 0.02 per unit of risk. If you would invest  72.00  in Smart Share Global on December 27, 2024 and sell it today you would earn a total of  40.00  from holding Smart Share Global or generate 55.56% return on investment over 90 days.

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

Smart Share Global  vs.  Planet Fitness

Smart Share Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Smart Share displayed solid returns over the last few months and may actually be approaching a breakup point.

Planet Fitness

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Planet Fitness is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Smart Share and Planet Fitness

The main advantage of trading using opposite Smart Share and Planet Fitness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smart Share 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 Smart Share Global 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.