Correlation Between Good Times and Planet Fitness

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

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

Diversification Opportunities for Good Times and Planet Fitness

-0.58

Correlation Coefficient

Good Times  Planet Fitness

Excellent diversification

The 3 months correlation between Good and Planet is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Good Times Restaurants and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness and Good Times 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 Good Times Restaurants 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 Good Times i.e., Good Times and Planet Fitness go up and down completely randomly.

Pair Corralation between Good Times and Planet Fitness

Given the investment horizon of 90 days Good Times Restaurants is expected to under-perform the Planet Fitness. In addition to that, Good Times is 1.18 times more volatile than Planet Fitness. It trades about -0.05 of its total potential returns per unit of risk. Planet Fitness is currently generating about 0.17 per unit of volatility. If you would invest  8,239  in Planet Fitness on September 13, 2024 and sell it today you would earn a total of  1,962  from holding Planet Fitness or generate 23.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Good Times Restaurants  vs.  Planet Fitness

Good Times Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Good Times Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Planet Fitness

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Planet Fitness unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Good Times and Planet Fitness

The main advantage of trading using opposite Good Times and Planet Fitness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Good Times 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 Good Times Restaurants 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.