Correlation Between Li Ning and Planet Fitness

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

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

Diversification Opportunities for Li Ning and Planet Fitness

-0.64

Correlation Coefficient

Li Ning  Planet Fitness

Excellent diversification

The 3 months correlation between LNLB and Planet is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Li Ning Company and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness and Li Ning 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 Li Ning Company 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 Li Ning i.e., Li Ning and Planet Fitness go up and down completely randomly.

Pair Corralation between Li Ning and Planet Fitness

Assuming the 90 days trading horizon Li Ning Company is expected to generate 1.24 times more return on investment than Planet Fitness. However, Li Ning is 1.24 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  202.00  in Li Ning Company on December 21, 2024 and sell it today you would earn a total of  6.00  from holding Li Ning Company or generate 2.97% return on investment over 90 days.

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

Li Ning Company  vs.  Planet Fitness

Li Ning Company

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Li Ning Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Li Ning 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

Very Weak

Over the last 90 days Planet Fitness has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Li Ning and Planet Fitness

The main advantage of trading using opposite Li Ning and Planet Fitness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Ning 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 Li Ning Company 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.