Correlation Between Planet Fitness and Arconic

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

By analyzing existing cross correlation between Planet Fitness and Arconic 59 percent, you can compare the effects of market volatilities on Planet Fitness and Arconic 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 Arconic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Planet Fitness and Arconic.

Diversification Opportunities for Planet Fitness and Arconic

-0.21

Correlation Coefficient

Planet Fitness  Arconic

Very good diversification

The 3 months correlation between Planet and Arconic is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Arconic 59 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arconic 59 percent 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 Arconic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arconic 59 percent has no effect on the direction of Planet Fitness i.e., Planet Fitness and Arconic go up and down completely randomly.

Pair Corralation between Planet Fitness and Arconic

Given the investment horizon of 90 days Planet Fitness is expected to generate 5.23 times more return on investment than Arconic. However, Planet Fitness is 5.23 times more volatile than Arconic 59 percent. It trades about 0.0 of its potential returns per unit of risk. Arconic 59 percent is currently generating about -0.04 per unit of risk. If you would invest  10,106  in Planet Fitness on December 24, 2024 and sell it today you would lose (104.00) from holding Planet Fitness or give up 1.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Planet Fitness  vs.  Arconic 59 percent

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.

Arconic 59 percent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arconic 59 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Arconic 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 Arconic

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

The idea behind Planet Fitness and Arconic 59 percent 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .