Correlation Between Planet Fitness and Warner Music
Can any of the company-specific risk be diversified away by investing in both Planet Fitness and Warner Music 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 Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Planet Fitness and Warner Music Group, you can compare the effects of market volatilities on Planet Fitness and Warner Music 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 Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Planet Fitness and Warner Music.
Diversification Opportunities for Planet Fitness and Warner Music
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Planet and Warner is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Planet Fitness i.e., Planet Fitness and Warner Music go up and down completely randomly.
Pair Corralation between Planet Fitness and Warner Music
Assuming the 90 days horizon Planet Fitness is expected to generate 1.16 times more return on investment than Warner Music. However, Planet Fitness is 1.16 times more volatile than Warner Music Group. It trades about 0.22 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.05 per unit of risk. If you would invest 7,700 in Planet Fitness on November 7, 2024 and sell it today you would earn a total of 2,700 from holding Planet Fitness or generate 35.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Planet Fitness vs. Warner Music Group
Performance |
| Timeline |
| Planet Fitness |
| Warner Music Group |
Planet Fitness and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Planet Fitness and Warner Music
The main advantage of trading using opposite Planet Fitness and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Planet Fitness position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music's long position.| Planet Fitness vs. AGNC INVESTMENT | Planet Fitness vs. CHRYSALIS INVESTMENTS LTD | Planet Fitness vs. JAPAN TOBACCO UNSPADR12 | Planet Fitness vs. DIVERSIFIED ROYALTY |
| Warner Music vs. Fevertree Drinks PLC | Warner Music vs. GEELY AUTOMOBILE | Warner Music vs. Cars Inc | Warner Music vs. PLANT VEDA FOODS |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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