Correlation Between Planet Fitness and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Planet Fitness and Verizon Communications 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 Planet Fitness and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Planet Fitness and Verizon Communications, you can compare the effects of market volatilities on Planet Fitness and Verizon Communications 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 Planet Fitness with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Planet Fitness and Verizon Communications.
Diversification Opportunities for Planet Fitness and Verizon Communications
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Planet and Verizon is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Planet Fitness 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 Planet Fitness are associated (or correlated) with Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Planet Fitness i.e., Planet Fitness and Verizon Communications go up and down completely randomly.
Pair Corralation between Planet Fitness and Verizon Communications
Given the investment horizon of 90 days Planet Fitness is expected to generate 1.87 times more return on investment than Verizon Communications. However, Planet Fitness is 1.87 times more volatile than Verizon Communications. It trades about 0.15 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.02 per unit of risk. If you would invest 5,971 in Planet Fitness on March 16, 2024 and sell it today you would earn a total of 1,279 from holding Planet Fitness or generate 21.42% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Planet Fitness vs. Verizon Communications
Performance |
Timeline |
Planet Fitness |
Verizon Communications |
Planet Fitness and Verizon Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Planet Fitness and Verizon Communications
The main advantage of trading using opposite Planet Fitness and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Planet Fitness position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.Planet Fitness vs. Madison Square Garden | Planet Fitness vs. Mattel Inc | Planet Fitness vs. Six Flags Entertainment | Planet Fitness vs. Johnson Outdoors |
Verizon Communications vs. Vanguard Small Cap Index | Verizon Communications vs. CNX Resources Corp | Verizon Communications vs. The Ensign Group | Verizon Communications vs. T Rowe Price |
Check out your portfolio center.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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