Correlation Between Planet Fitness and Toyota

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

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

Diversification Opportunities for Planet Fitness and Toyota

0.52

Correlation Coefficient

Planet Fitness  Toyota

Very weak diversification

The 3 months correlation between Planet and Toyota is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor and Planet Fitness 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 Planet Fitness are associated (or correlated) with Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor has no effect on the direction of Planet Fitness i.e., Planet Fitness and Toyota go up and down completely randomly.

Pair Corralation between Planet Fitness and Toyota

Assuming the 90 days trading horizon Planet Fitness is expected to generate 6.21 times more return on investment than Toyota. However, Planet Fitness is 6.21 times more volatile than Toyota Motor. It trades about 0.13 of its potential returns per unit of risk. Toyota Motor is currently generating about 0.07 per unit of risk. If you would invest  3,984  in Planet Fitness on September 12, 2024 and sell it today you would earn a total of  3,608  from holding Planet Fitness or generate 90.56% return on investment over 90 days.

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

Planet Fitness  vs.  Toyota Motor

Planet Fitness

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Planet Fitness sustained solid returns over the last few months and may actually be approaching a breakup point.

Toyota Motor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Motor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Toyota may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Planet Fitness and Toyota

The main advantage of trading using opposite Planet Fitness and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Planet Fitness position performs unexpectedly, Toyota 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 Toyota will offset losses from the drop in Toyota's long position.

The idea behind Planet Fitness and Toyota Motor 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.