Correlation Between Planet Fitness and Copart

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

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

Diversification Opportunities for Planet Fitness and Copart

0.44

Correlation Coefficient

Planet Fitness  Copart

Very weak diversification

The 3 months correlation between Planet and Copart is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Copart Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copart Inc 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 are associated (or correlated) with Copart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copart Inc has no effect on the direction of Planet Fitness i.e., Planet Fitness and Copart go up and down completely randomly.

Pair Corralation between Planet Fitness and Copart

Assuming the 90 days trading horizon Planet Fitness is expected to generate 5.25 times more return on investment than Copart. However, Planet Fitness is 5.25 times more volatile than Copart Inc. It trades about 0.13 of its potential returns per unit of risk. Copart Inc is currently generating about 0.18 per unit of risk. If you would invest  3,984  in Planet Fitness on September 12, 2024 and sell it today you would earn a total of  3,608  from holding Planet Fitness or generate 90.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Planet Fitness  vs.  Copart Inc

Planet Fitness

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Planet Fitness sustained solid returns over the last few months and may actually be approaching a breakup point.

Copart Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Copart Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Copart sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Planet Fitness and Copart

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

The idea behind Planet Fitness and Copart Inc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.