Correlation Between Vulcan Materials and Planet Fitness

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

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

Diversification Opportunities for Vulcan Materials and Planet Fitness

0.3

Correlation Coefficient

Vulcan Materials  Planet Fitness

Weak diversification

The 3 months correlation between Vulcan and Planet is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness and Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials i.e., Vulcan Materials and Planet Fitness go up and down completely randomly.

Pair Corralation between Vulcan Materials and Planet Fitness

Assuming the 90 days horizon Vulcan Materials is expected to generate 0.72 times more return on investment than Planet Fitness. However, Vulcan Materials is 1.38 times less risky than Planet Fitness. It trades about 0.06 of its potential returns per unit of risk. Planet Fitness is currently generating about 0.04 per unit of risk. If you would invest  16,668  in Vulcan Materials on October 25, 2024 and sell it today you would earn a total of  9,532  from holding Vulcan Materials or generate 57.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Vulcan Materials  vs.  Planet Fitness

Vulcan Materials

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Vulcan Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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

Pair Trading with Vulcan Materials and Planet Fitness

The main advantage of trading using opposite Vulcan Materials and Planet Fitness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials 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 Vulcan Materials 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 Stocks Directory module to find actively traded stocks across global markets.