Correlation Between Salon City and Planet Fitness

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

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

Diversification Opportunities for Salon City and Planet Fitness

0.39

Correlation Coefficient

Salon City  Planet Fitness

Weak diversification

The 3 months correlation between Salon and Planet is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Salon City and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness and Salon City 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 Salon City 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 Salon City i.e., Salon City and Planet Fitness go up and down completely randomly.

Pair Corralation between Salon City and Planet Fitness

If you would invest  8,125  in Planet Fitness on October 26, 2024 and sell it today you would earn a total of  2,429  from holding Planet Fitness or generate 29.9% return on investment over 90 days.

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

Salon City  vs.  Planet Fitness

Salon City

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salon City has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Salon City is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Planet Fitness

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 16 (%) 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.

Pair Trading with Salon City and Planet Fitness

The main advantage of trading using opposite Salon City and Planet Fitness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salon City 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 Salon City 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.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.