Correlation Between Planet Fitness and AstraZeneca PLC

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

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

Diversification Opportunities for Planet Fitness and AstraZeneca PLC

0.22

Correlation Coefficient

Planet Fitness  AstraZeneca PLC

Modest diversification

The 3 months correlation between Planet and AstraZeneca is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and AstraZeneca PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC ADR 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC ADR has no effect on the direction of Planet Fitness i.e., Planet Fitness and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Planet Fitness and AstraZeneca PLC

Given the investment horizon of 90 days Planet Fitness is expected to generate 6.05 times less return on investment than AstraZeneca PLC. In addition to that, Planet Fitness is 1.9 times more volatile than AstraZeneca PLC ADR. It trades about 0.02 of its total potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about 0.25 per unit of volatility. If you would invest  6,593  in AstraZeneca PLC ADR on February 26, 2024 and sell it today you would earn a total of  1,261  from holding AstraZeneca PLC ADR or generate 19.13% return on investment over 90 days.

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

Planet Fitness  vs.  AstraZeneca PLC ADR

Planet Fitness

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Planet Fitness is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

AstraZeneca PLC ADR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AstraZeneca PLC ADR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very sluggish basic indicators, AstraZeneca PLC displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Planet Fitness and AstraZeneca PLC

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

The idea behind Planet Fitness and AstraZeneca PLC ADR 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.