Correlation Between Planet Fitness and Monks Investment

Can any of the company-specific risk be diversified away by investing in both Planet Fitness and Monks Investment 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 Monks Investment 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 Monks Investment Trust, you can compare the effects of market volatilities on Planet Fitness and Monks Investment 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 Monks Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Planet Fitness and Monks Investment.

Diversification Opportunities for Planet Fitness and Monks Investment

0.88

Correlation Coefficient

Planet Fitness  Monks Investment

Very poor diversification

The 3 months correlation between Planet and Monks is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness Cl and Monks Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monks Investment Trust 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 Monks Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monks Investment Trust has no effect on the direction of Planet Fitness i.e., Planet Fitness and Monks Investment go up and down completely randomly.

Pair Corralation between Planet Fitness and Monks Investment

Assuming the 90 days trading horizon Planet Fitness Cl is expected to generate 2.33 times more return on investment than Monks Investment. However, Planet Fitness is 2.33 times more volatile than Monks Investment Trust. It trades about 0.08 of its potential returns per unit of risk. Monks Investment Trust is currently generating about 0.09 per unit of risk. If you would invest  6,959  in Planet Fitness Cl on September 12, 2024 and sell it today you would earn a total of  3,143  from holding Planet Fitness Cl or generate 45.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.98%
Values	Daily Returns

Planet Fitness Cl  vs.  Monks Investment Trust

Planet Fitness Cl

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness Cl are ranked lower than 11 (%) 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.

Monks Investment Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Monks Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Planet Fitness and Monks Investment

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

The idea behind Planet Fitness Cl and Monks Investment Trust 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.