Correlation Between McDonalds and Planet Fitness
Can any of the company-specific risk be diversified away by investing in both McDonalds and Planet Fitness 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 McDonalds and Planet Fitness into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Planet Fitness, you can compare the effects of market volatilities on McDonalds and Planet Fitness 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 McDonalds with a short position of Planet Fitness. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Planet Fitness.
Diversification Opportunities for McDonalds and Planet Fitness
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between McDonalds and Planet is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness and McDonalds 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 McDonalds are associated (or correlated) with Planet Fitness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planet Fitness has no effect on the direction of McDonalds i.e., McDonalds and Planet Fitness go up and down completely randomly.
Pair Corralation between McDonalds and Planet Fitness
Considering the 90-day investment horizon McDonalds is expected to generate 183.42 times less return on investment than Planet Fitness. But when comparing it to its historical volatility, McDonalds is 2.82 times less risky than Planet Fitness. It trades about 0.01 of its potential returns per unit of risk. Planet Fitness is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 8,014 in Planet Fitness on August 30, 2024 and sell it today you would earn a total of 2,088 from holding Planet Fitness or generate 26.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Planet Fitness
Performance |
| Timeline |
| McDonalds |
| Planet Fitness |
McDonalds and Planet Fitness Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Planet Fitness
The main advantage of trading using opposite McDonalds and Planet Fitness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Planet Fitness 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 Planet Fitness will offset losses from the drop in Planet Fitness' long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
| Planet Fitness vs. Chipotle Mexican Grill | Planet Fitness vs. Yum Brands | Planet Fitness vs. The Wendys Co | Planet Fitness vs. McDonalds |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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