Correlation Between Planet Fitness and Applied Materials

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

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

Diversification Opportunities for Planet Fitness and Applied Materials

0.66

Correlation Coefficient

Planet Fitness  Applied Materials

Poor diversification

The 3 months correlation between Planet and Applied is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Planet Fitness and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Planet Fitness i.e., Planet Fitness and Applied Materials go up and down completely randomly.

Pair Corralation between Planet Fitness and Applied Materials

Assuming the 90 days horizon Planet Fitness is expected to generate 2.54 times less return on investment than Applied Materials. But when comparing it to its historical volatility, Planet Fitness is 1.36 times less risky than Applied Materials. It trades about 0.12 of its potential returns per unit of risk. Applied Materials is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  11,827  in Applied Materials on April 20, 2025 and sell it today you would earn a total of  4,731  from holding Applied Materials or generate 40.0% return on investment over 90 days.

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

Planet Fitness  vs.  Applied Materials

Planet Fitness

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Planet Fitness reported solid returns over the last few months and may actually be approaching a breakup point.

Applied Materials

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Applied Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Planet Fitness and Applied Materials

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

The idea behind Planet Fitness and Applied Materials 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.