Correlation Between Shimano and Planet Fitness

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

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

Diversification Opportunities for Shimano and Planet Fitness

-0.77

Correlation Coefficient

Shimano  Planet Fitness

Pay attention - limited upside

The 3 months correlation between Shimano and Planet is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Shimano and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness and Shimano 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 Shimano 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 Shimano i.e., Shimano and Planet Fitness go up and down completely randomly.

Pair Corralation between Shimano and Planet Fitness

Assuming the 90 days horizon Shimano is expected to under-perform the Planet Fitness. But the stock apears to be less risky and, when comparing its historical volatility, Shimano is 1.56 times less risky than Planet Fitness. The stock trades about -0.17 of its potential returns per unit of risk. The Planet Fitness is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,350  in Planet Fitness on October 6, 2024 and sell it today you would earn a total of  2,300  from holding Planet Fitness or generate 31.29% return on investment over 90 days.

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

Shimano  vs.  Planet Fitness

Shimano

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 Shimano and Planet Fitness

The main advantage of trading using opposite Shimano and Planet Fitness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shimano 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 Shimano 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.