Correlation Between Planet Fitness and Meta Platforms

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Can any of the company-specific risk be diversified away by investing in both Planet Fitness and Meta Platforms 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 Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Planet Fitness and Meta Platforms, you can compare the effects of market volatilities on Planet Fitness and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Planet Fitness and Meta Platforms.

Diversification Opportunities for Planet Fitness and Meta Platforms

0.42
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Planet and Meta is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Planet Fitness i.e., Planet Fitness and Meta Platforms go up and down completely randomly.

Pair Corralation between Planet Fitness and Meta Platforms

Assuming the 90 days trading horizon Planet Fitness is expected to generate 5.7 times more return on investment than Meta Platforms. However, Planet Fitness is 5.7 times more volatile than Meta Platforms. It trades about 0.13 of its potential returns per unit of risk. Meta Platforms is currently generating about 0.21 per unit of risk. If you would invest  3,984  in Planet Fitness on September 11, 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 Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Planet Fitness  vs.  Meta Platforms

 Performance 
       Timeline  
Planet Fitness 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
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.
Meta Platforms 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Meta Platforms sustained solid returns over the last few months and may actually be approaching a breakup point.

Planet Fitness and Meta Platforms Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Planet Fitness and Meta Platforms

The main advantage of trading using opposite Planet Fitness and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Planet Fitness position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.
The idea behind Planet Fitness and Meta Platforms 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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