Correlation Between EMPEROR ENT and Planet Fitness

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

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

Diversification Opportunities for EMPEROR ENT and Planet Fitness

-0.74

Correlation Coefficient

EMPEROR ENT  Planet Fitness

Pay attention - limited upside

The 3 months correlation between EMPEROR and Planet is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding EMPEROR ENT HOTEL and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness and EMPEROR ENT 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 EMPEROR ENT HOTEL 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 EMPEROR ENT i.e., EMPEROR ENT and Planet Fitness go up and down completely randomly.

Pair Corralation between EMPEROR ENT and Planet Fitness

Assuming the 90 days trading horizon EMPEROR ENT HOTEL is expected to generate 3.19 times more return on investment than Planet Fitness. However, EMPEROR ENT is 3.19 times more volatile than Planet Fitness. It trades about 0.03 of its potential returns per unit of risk. Planet Fitness is currently generating about 0.04 per unit of risk. If you would invest  3.66  in EMPEROR ENT HOTEL on October 12, 2024 and sell it today you would lose (0.16) from holding EMPEROR ENT HOTEL or give up 4.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

EMPEROR ENT HOTEL  vs.  Planet Fitness

EMPEROR ENT HOTEL

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days EMPEROR ENT HOTEL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Planet Fitness

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 12 (%) 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 EMPEROR ENT and Planet Fitness

The main advantage of trading using opposite EMPEROR ENT and Planet Fitness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMPEROR ENT 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 EMPEROR ENT HOTEL 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.