Correlation Between Planet Fitness and Broadcom

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

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

Diversification Opportunities for Planet Fitness and Broadcom

0.26

Correlation Coefficient

Planet Fitness  Broadcom

Modest diversification

The 3 months correlation between Planet and Broadcom is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness Cl and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom 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 Cl are associated (or correlated) with Broadcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadcom has no effect on the direction of Planet Fitness i.e., Planet Fitness and Broadcom go up and down completely randomly.

Pair Corralation between Planet Fitness and Broadcom

Assuming the 90 days trading horizon Planet Fitness is expected to generate 56.93 times less return on investment than Broadcom. But when comparing it to its historical volatility, Planet Fitness Cl is 44.37 times less risky than Broadcom. It trades about 0.08 of its potential returns per unit of risk. Broadcom is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9,083  in Broadcom on September 28, 2024 and sell it today you would earn a total of  14,885  from holding Broadcom or generate 163.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.3%
Values	Daily Returns

Planet Fitness Cl  vs.  Broadcom

Planet Fitness Cl

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness Cl are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Planet Fitness unveiled solid returns over the last few months and may actually be approaching a breakup point.

Broadcom

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Broadcom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Planet Fitness and Broadcom

The main advantage of trading using opposite Planet Fitness and Broadcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Planet Fitness position performs unexpectedly, Broadcom 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 Broadcom will offset losses from the drop in Broadcom's long position.

The idea behind Planet Fitness Cl and Broadcom 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 Global Correlations module to find global opportunities by holding instruments from different markets.