Correlation Between Royal Caribbean and Planet Fitness

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

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

Diversification Opportunities for Royal Caribbean and Planet Fitness

0.91

Correlation Coefficient

Royal Caribbean  Planet Fitness

Almost no diversification

The 3 months correlation between Royal and Planet is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Group and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness and Royal Caribbean 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 Royal Caribbean Group are associated (or correlated) with Planet Fitness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planet Fitness has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Planet Fitness go up and down completely randomly.

Pair Corralation between Royal Caribbean and Planet Fitness

Assuming the 90 days horizon Royal Caribbean is expected to generate 1.98 times less return on investment than Planet Fitness. But when comparing it to its historical volatility, Royal Caribbean Group is 1.33 times less risky than Planet Fitness. It trades about 0.18 of its potential returns per unit of risk. Planet Fitness is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  7,250  in Planet Fitness on October 6, 2024 and sell it today you would earn a total of  2,450  from holding Planet Fitness or generate 33.79% return on investment over 90 days.

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

Royal Caribbean Group  vs.  Planet Fitness

Royal Caribbean Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Caribbean Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Royal Caribbean reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite nearly fragile basic indicators, Planet Fitness reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Caribbean and Planet Fitness

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

The idea behind Royal Caribbean Group and Planet 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.