Correlation Between Sealed Air and Planet Fitness

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

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

Diversification Opportunities for Sealed Air and Planet Fitness

-0.21

Correlation Coefficient

Sealed Air  Planet Fitness

Very good diversification

The 3 months correlation between Sealed and Planet is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness and Sealed Air 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 Sealed Air 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 Sealed Air i.e., Sealed Air and Planet Fitness go up and down completely randomly.

Pair Corralation between Sealed Air and Planet Fitness

Considering the 90-day investment horizon Sealed Air is expected to under-perform the Planet Fitness. But the stock apears to be less risky and, when comparing its historical volatility, Sealed Air is 1.39 times less risky than Planet Fitness. The stock trades about -0.33 of its potential returns per unit of risk. The Planet Fitness is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  9,867  in Planet Fitness on October 10, 2024 and sell it today you would lose (22.00) from holding Planet Fitness or give up 0.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Sealed Air  vs.  Planet Fitness

Sealed Air

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sealed Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Sealed Air is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Planet Fitness

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 12 (%) 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 Sealed Air and Planet Fitness

The main advantage of trading using opposite Sealed Air and Planet Fitness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sealed Air 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 Sealed Air 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.