Correlation Between Meta Platforms and Apple
Can any of the company-specific risk be diversified away by investing in both Meta Platforms and Apple 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 Meta Platforms and Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and Apple Inc, you can compare the effects of market volatilities on Meta Platforms and Apple 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 Meta Platforms with a short position of Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Apple.
Diversification Opportunities for Meta Platforms and Apple
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Meta and Apple is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Meta Platforms 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 Meta Platforms are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Meta Platforms i.e., Meta Platforms and Apple go up and down completely randomly.
Pair Corralation between Meta Platforms and Apple
Given the investment horizon of 90 days Meta Platforms is expected to generate 0.94 times more return on investment than Apple. However, Meta Platforms is 1.06 times less risky than Apple. It trades about 0.4 of its potential returns per unit of risk. Apple Inc is currently generating about -0.08 per unit of risk. If you would invest 59,924 in Meta Platforms on November 3, 2024 and sell it today you would earn a total of 8,994 from holding Meta Platforms or generate 15.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meta Platforms vs. Apple Inc
Performance |
| Timeline |
| Meta Platforms |
| Apple Inc |
Meta Platforms and Apple Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meta Platforms and Apple
The main advantage of trading using opposite Meta Platforms and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.| Meta Platforms vs. Alphabet Inc Class A | Meta Platforms vs. Twilio Inc | Meta Platforms vs. Snap Inc | Meta Platforms vs. Baidu Inc |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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