Correlation Between Planet Fitness and Nikon Corp

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

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

Diversification Opportunities for Planet Fitness and Nikon Corp

0.11

Correlation Coefficient

Planet Fitness  Nikon Corp

Average diversification

The 3 months correlation between Planet and Nikon is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Nikon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nikon Corp 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 Nikon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nikon Corp has no effect on the direction of Planet Fitness i.e., Planet Fitness and Nikon Corp go up and down completely randomly.

Pair Corralation between Planet Fitness and Nikon Corp

Given the investment horizon of 90 days Planet Fitness is expected to generate 5.89 times less return on investment than Nikon Corp. But when comparing it to its historical volatility, Planet Fitness is 1.46 times less risky than Nikon Corp. It trades about 0.01 of its potential returns per unit of risk. Nikon Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,031  in Nikon Corp on December 28, 2024 and sell it today you would earn a total of  22.00  from holding Nikon Corp or generate 2.13% return on investment over 90 days.

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

Planet Fitness  vs.  Nikon Corp

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.

Nikon Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nikon Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Nikon Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Planet Fitness and Nikon Corp

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

The idea behind Planet Fitness and Nikon Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.