Correlation Between Financial and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Financial and Meta Platforms 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 Financial and Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial 15 Split and Meta Platforms CDR, you can compare the effects of market volatilities on Financial and Meta Platforms 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 Financial with a short position of Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Meta Platforms.
Diversification Opportunities for Financial and Meta Platforms
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Financial and Meta is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Meta Platforms CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms CDR and Financial 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 Financial 15 Split are associated (or correlated) with Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms CDR has no effect on the direction of Financial i.e., Financial and Meta Platforms go up and down completely randomly.
Pair Corralation between Financial and Meta Platforms
Assuming the 90 days trading horizon Financial is expected to generate 3.4 times less return on investment than Meta Platforms. But when comparing it to its historical volatility, Financial 15 Split is 6.61 times less risky than Meta Platforms. It trades about 0.78 of its potential returns per unit of risk. Meta Platforms CDR is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 3,424 in Meta Platforms CDR on November 8, 2024 and sell it today you would earn a total of 472.00 from holding Meta Platforms CDR or generate 13.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial 15 Split vs. Meta Platforms CDR
Performance |
| Timeline |
| Financial 15 Split |
| Meta Platforms CDR |
Financial and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and Meta Platforms
The main advantage of trading using opposite Financial and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.The idea behind Financial 15 Split and Meta Platforms CDR 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.| Meta Platforms vs. Canadian General Investments | Meta Platforms vs. Atrium Mortgage Investment | Meta Platforms vs. CVW CleanTech | Meta Platforms vs. Upstart Investments |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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