Correlation Between London Security and Planet Fitness

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

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

Diversification Opportunities for London Security and Planet Fitness

-0.84

Correlation Coefficient

London Security  Planet Fitness

Pay attention - limited upside

The 3 months correlation between London and Planet is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Planet Fitness Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness Cl and London Security 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 London Security Plc 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 Cl has no effect on the direction of London Security i.e., London Security and Planet Fitness go up and down completely randomly.

Pair Corralation between London Security and Planet Fitness

Assuming the 90 days trading horizon London Security Plc is expected to under-perform the Planet Fitness. But the stock apears to be less risky and, when comparing its historical volatility, London Security Plc is 1.73 times less risky than Planet Fitness. The stock trades about -0.09 of its potential returns per unit of risk. The Planet Fitness Cl is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  8,278  in Planet Fitness Cl on September 24, 2024 and sell it today you would earn a total of  1,743  from holding Planet Fitness Cl or generate 21.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.92%
Values	Daily Returns

London Security Plc  vs.  Planet Fitness Cl

London Security Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days London Security Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Planet Fitness Cl

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness Cl are ranked lower than 10 (%) 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.

Pair Trading with London Security and Planet Fitness

The main advantage of trading using opposite London Security and Planet Fitness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security 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 London Security Plc and Planet Fitness Cl 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.