Correlation Between Where Food and Planet Fitness

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

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

Diversification Opportunities for Where Food and Planet Fitness

0.09

Correlation Coefficient

Where Food  Planet Fitness

Significant diversification

The 3 months correlation between Where and Planet is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Where Food Comes and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness and Where Food 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 Where Food Comes 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 Where Food i.e., Where Food and Planet Fitness go up and down completely randomly.

Pair Corralation between Where Food and Planet Fitness

Given the investment horizon of 90 days Where Food Comes is expected to generate 1.24 times more return on investment than Planet Fitness. However, Where Food is 1.24 times more volatile than Planet Fitness. It trades about -0.05 of its potential returns per unit of risk. Planet Fitness is currently generating about -0.07 per unit of risk. If you would invest  1,322  in Where Food Comes on December 2, 2024 and sell it today you would lose (83.00) from holding Where Food Comes or give up 6.28% of portfolio value over 90 days.

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

Where Food Comes  vs.  Planet Fitness

Where Food Comes

Risk-Adjusted Performance

Very Weak

Over the last 90 days Where Food Comes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Where Food is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Planet Fitness

Risk-Adjusted Performance

Very Weak

Over the last 90 days Planet Fitness has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Where Food and Planet Fitness

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