Correlation Between Life Time and Planet Fitness

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

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

Diversification Opportunities for Life Time and Planet Fitness

0.09

Correlation Coefficient

Life Time  Planet Fitness

Significant diversification

The 3 months correlation between Life and Planet is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness and Life Time 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 Life Time Group 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 Life Time i.e., Life Time and Planet Fitness go up and down completely randomly.

Pair Corralation between Life Time and Planet Fitness

Considering the 90-day investment horizon Life Time is expected to generate 6.27 times less return on investment than Planet Fitness. But when comparing it to its historical volatility, Life Time Group is 1.03 times less risky than Planet Fitness. It trades about 0.03 of its potential returns per unit of risk. Planet Fitness is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  7,973  in Planet Fitness on August 31, 2024 and sell it today you would earn a total of  2,129  from holding Planet Fitness or generate 26.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Life Time Group  vs.  Planet Fitness

Life Time Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Life Time Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Life Time is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Planet Fitness

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Planet Fitness unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Life Time and Planet Fitness

The main advantage of trading using opposite Life Time and Planet Fitness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Time 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 Life Time Group 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.