Correlation Between Planet Fitness and Reborn Coffee

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

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

Diversification Opportunities for Planet Fitness and Reborn Coffee

-0.8

Correlation Coefficient

Planet Fitness  Reborn Coffee

Pay attention - limited upside

The 3 months correlation between Planet and Reborn is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Reborn Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reborn Coffee 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 Reborn Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reborn Coffee has no effect on the direction of Planet Fitness i.e., Planet Fitness and Reborn Coffee go up and down completely randomly.

Pair Corralation between Planet Fitness and Reborn Coffee

Given the investment horizon of 90 days Planet Fitness is expected to generate 0.33 times more return on investment than Reborn Coffee. However, Planet Fitness is 3.02 times less risky than Reborn Coffee. It trades about 0.15 of its potential returns per unit of risk. Reborn Coffee is currently generating about -0.21 per unit of risk. If you would invest  8,278  in Planet Fitness on September 14, 2024 and sell it today you would earn a total of  1,758  from holding Planet Fitness or generate 21.24% return on investment over 90 days.

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

Planet Fitness  vs.  Reborn Coffee

Planet Fitness

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 12 (%) 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.

Reborn Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reborn Coffee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Planet Fitness and Reborn Coffee

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

The idea behind Planet Fitness and Reborn Coffee 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.