Correlation Between Good Times and Planet Fitness

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

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

Diversification Opportunities for Good Times and Planet Fitness

0.26

Correlation Coefficient

Good Times  Planet Fitness

Modest diversification

The 3 months correlation between Good and Planet is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Good Times Restaurants and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness and Good Times 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 Good Times Restaurants 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 Good Times i.e., Good Times and Planet Fitness go up and down completely randomly.

Pair Corralation between Good Times and Planet Fitness

Given the investment horizon of 90 days Good Times Restaurants is expected to under-perform the Planet Fitness. But the stock apears to be less risky and, when comparing its historical volatility, Good Times Restaurants is 1.05 times less risky than Planet Fitness. The stock trades about -0.05 of its potential returns per unit of risk. The Planet Fitness is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9,976  in Planet Fitness on December 27, 2024 and sell it today you would earn a total of  84.00  from holding Planet Fitness or generate 0.84% return on investment over 90 days.

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

Good Times Restaurants  vs.  Planet Fitness

Good Times Restaurants

Risk-Adjusted Performance

Very Weak

Over the last 90 days Good Times Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Good Times is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 Good Times and Planet Fitness

The main advantage of trading using opposite Good Times and Planet Fitness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Good Times 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 Good Times Restaurants 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.