Correlation Between Planet Fitness and Xponential Fitness

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

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

Diversification Opportunities for Planet Fitness and Xponential Fitness

0.54

Correlation Coefficient

Planet Fitness  Xponential Fitness

Very weak diversification

The 3 months correlation between Planet and Xponential is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Xponential Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xponential Fitness 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 Xponential Fitness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xponential Fitness has no effect on the direction of Planet Fitness i.e., Planet Fitness and Xponential Fitness go up and down completely randomly.

Pair Corralation between Planet Fitness and Xponential Fitness

Given the investment horizon of 90 days Planet Fitness is expected to generate 0.3 times more return on investment than Xponential Fitness. However, Planet Fitness is 3.34 times less risky than Xponential Fitness. It trades about -0.02 of its potential returns per unit of risk. Xponential Fitness is currently generating about -0.08 per unit of risk. If you would invest  9,968  in Planet Fitness on December 30, 2024 and sell it today you would lose (346.00) from holding Planet Fitness or give up 3.47% of portfolio value over 90 days.

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

Planet Fitness  vs.  Xponential Fitness

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.

Xponential Fitness

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xponential Fitness has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Planet Fitness and Xponential Fitness

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

The idea behind Planet Fitness and Xponential Fitness 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.