Correlation Between Planet Fitness and Cadence Design

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

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

Diversification Opportunities for Planet Fitness and Cadence Design

0.74

Correlation Coefficient

Planet Fitness  Cadence Design

Poor diversification

The 3 months correlation between Planet and Cadence is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Cadence Design Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Design Systems 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 Cadence Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Design Systems has no effect on the direction of Planet Fitness i.e., Planet Fitness and Cadence Design go up and down completely randomly.

Pair Corralation between Planet Fitness and Cadence Design

Given the investment horizon of 90 days Planet Fitness is expected to generate 0.83 times more return on investment than Cadence Design. However, Planet Fitness is 1.2 times less risky than Cadence Design. It trades about 0.02 of its potential returns per unit of risk. Cadence Design Systems is currently generating about -0.09 per unit of risk. If you would invest  9,926  in Planet Fitness on December 20, 2024 and sell it today you would earn a total of  107.00  from holding Planet Fitness or generate 1.08% return on investment over 90 days.

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

Planet Fitness  vs.  Cadence Design Systems

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.

Cadence Design Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cadence Design Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Planet Fitness and Cadence Design

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

The idea behind Planet Fitness and Cadence Design Systems 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.