Correlation Between Planet Fitness and MagnaChip Semiconductor

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

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

Diversification Opportunities for Planet Fitness and MagnaChip Semiconductor

-0.7

Correlation Coefficient

Planet Fitness  MagnaChip Semiconductor

Excellent diversification

The 3 months correlation between Planet and MagnaChip is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and MagnaChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor 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 MagnaChip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MagnaChip Semiconductor has no effect on the direction of Planet Fitness i.e., Planet Fitness and MagnaChip Semiconductor go up and down completely randomly.

Pair Corralation between Planet Fitness and MagnaChip Semiconductor

Given the investment horizon of 90 days Planet Fitness is expected to generate 0.76 times more return on investment than MagnaChip Semiconductor. However, Planet Fitness is 1.31 times less risky than MagnaChip Semiconductor. It trades about 0.16 of its potential returns per unit of risk. MagnaChip Semiconductor is currently generating about -0.06 per unit of risk. If you would invest  5,843  in Planet Fitness on September 20, 2024 and sell it today you would earn a total of  4,075  from holding Planet Fitness or generate 69.74% return on investment over 90 days.

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

Planet Fitness  vs.  MagnaChip Semiconductor

Planet Fitness

Risk-Adjusted Performance

10 of 100

Good

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. 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.

MagnaChip Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MagnaChip Semiconductor 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 fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Planet Fitness and MagnaChip Semiconductor

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

The idea behind Planet Fitness and MagnaChip Semiconductor 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.