Correlation Between Planet Fitness and Peloton Interactive

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

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

Diversification Opportunities for Planet Fitness and Peloton Interactive

0.85

Correlation Coefficient

Planet Fitness  Peloton Interactive

Very poor diversification

The 3 months correlation between Planet and Peloton is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Peloton Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peloton Interactive 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 Peloton Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peloton Interactive has no effect on the direction of Planet Fitness i.e., Planet Fitness and Peloton Interactive go up and down completely randomly.

Pair Corralation between Planet Fitness and Peloton Interactive

Given the investment horizon of 90 days Planet Fitness is expected to generate 3.55 times less return on investment than Peloton Interactive. But when comparing it to its historical volatility, Planet Fitness is 2.86 times less risky than Peloton Interactive. It trades about 0.17 of its potential returns per unit of risk. Peloton Interactive is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  473.00  in Peloton Interactive on September 13, 2024 and sell it today you would earn a total of  477.00  from holding Peloton Interactive or generate 100.85% return on investment over 90 days.

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

Planet Fitness  vs.  Peloton Interactive

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.

Peloton Interactive

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Peloton Interactive are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Peloton Interactive displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Planet Fitness and Peloton Interactive

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

The idea behind Planet Fitness and Peloton Interactive 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.