Correlation Between Planet Fitness and BOWL Old

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

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

Diversification Opportunities for Planet Fitness and BOWL Old

0.39

Correlation Coefficient

Planet Fitness  BOWL Old

Weak diversification

The 3 months correlation between Planet and BOWL is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and BOWL Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOWL Old 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 BOWL Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOWL Old has no effect on the direction of Planet Fitness i.e., Planet Fitness and BOWL Old go up and down completely randomly.

Pair Corralation between Planet Fitness and BOWL Old

Given the investment horizon of 90 days Planet Fitness is expected to under-perform the BOWL Old. But the stock apears to be less risky and, when comparing its historical volatility, Planet Fitness is 1.46 times less risky than BOWL Old. The stock trades about -0.02 of its potential returns per unit of risk. The BOWL Old is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,030  in BOWL Old on December 29, 2024 and sell it today you would earn a total of  261.00  from holding BOWL Old or generate 25.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	50.82%
Values	Daily Returns

Planet Fitness  vs.  BOWL Old

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. 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.

BOWL Old

Risk-Adjusted Performance

Solid

Over the last 90 days BOWL Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite fragile basic indicators, BOWL Old disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Planet Fitness and BOWL Old

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

The idea behind Planet Fitness and BOWL Old 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.

Check out your portfolio center.

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.