Correlation Between Planet Fitness and Marine Products

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

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

Diversification Opportunities for Planet Fitness and Marine Products

0.72

Correlation Coefficient

Planet Fitness  Marine Products

Poor diversification

The 3 months correlation between Planet and Marine is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Marine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Products 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 Marine Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Products has no effect on the direction of Planet Fitness i.e., Planet Fitness and Marine Products go up and down completely randomly.

Pair Corralation between Planet Fitness and Marine Products

Given the investment horizon of 90 days Planet Fitness is expected to generate 1.35 times more return on investment than Marine Products. However, Planet Fitness is 1.35 times more volatile than Marine Products. It trades about 0.19 of its potential returns per unit of risk. Marine Products is currently generating about 0.1 per unit of risk. If you would invest  7,898  in Planet Fitness on September 4, 2024 and sell it today you would earn a total of  2,060  from holding Planet Fitness or generate 26.08% 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.  Marine Products

Planet Fitness

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Planet Fitness unveiled solid returns over the last few months and may actually be approaching a breakup point.

Marine Products

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Marine Products are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Marine Products may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Planet Fitness and Marine Products

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

The idea behind Planet Fitness and Marine Products 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.