Correlation Between Planet Fitness and Chipotle Mexican

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

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

Diversification Opportunities for Planet Fitness and Chipotle Mexican

-0.43

Correlation Coefficient

Planet Fitness  Chipotle Mexican

Very good diversification

The 3 months correlation between Planet and Chipotle is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Chipotle Mexican Grill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chipotle Mexican Grill 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 Chipotle Mexican. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chipotle Mexican Grill has no effect on the direction of Planet Fitness i.e., Planet Fitness and Chipotle Mexican go up and down completely randomly.

Pair Corralation between Planet Fitness and Chipotle Mexican

Given the investment horizon of 90 days Planet Fitness is expected to under-perform the Chipotle Mexican. But the stock apears to be less risky and, when comparing its historical volatility, Planet Fitness is 1.09 times less risky than Chipotle Mexican. The stock trades about -0.22 of its potential returns per unit of risk. The Chipotle Mexican Grill is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,620  in Chipotle Mexican Grill on November 19, 2024 and sell it today you would earn a total of  88.00  from holding Chipotle Mexican Grill or generate 1.57% return on investment over 90 days.

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

Planet Fitness  vs.  Chipotle Mexican Grill

Planet Fitness

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 3 (%) 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.

Chipotle Mexican Grill

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chipotle Mexican Grill has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Chipotle Mexican is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Planet Fitness and Chipotle Mexican

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

The idea behind Planet Fitness and Chipotle Mexican Grill 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.