Correlation Between Meta Platforms and Elah Holdings

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Can any of the company-specific risk be diversified away by investing in both Meta Platforms and Elah Holdings 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 Elah Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and Elah Holdings, you can compare the effects of market volatilities on Meta Platforms and Elah Holdings 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 Elah Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Elah Holdings.

Diversification Opportunities for Meta Platforms and Elah Holdings

-0.69
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Meta and Elah is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Elah Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elah Holdings 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 Elah Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elah Holdings has no effect on the direction of Meta Platforms i.e., Meta Platforms and Elah Holdings go up and down completely randomly.

Pair Corralation between Meta Platforms and Elah Holdings

Given the investment horizon of 90 days Meta Platforms is expected to generate 0.16 times more return on investment than Elah Holdings. However, Meta Platforms is 6.38 times less risky than Elah Holdings. It trades about 0.38 of its potential returns per unit of risk. Elah Holdings is currently generating about 0.0 per unit of risk. If you would invest  55,408  in Meta Platforms on September 16, 2024 and sell it today you would earn a total of  6,627  from holding Meta Platforms or generate 11.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Meta Platforms  vs.  Elah Holdings

 Performance 
       Timeline  
Meta Platforms 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Meta Platforms sustained solid returns over the last few months and may actually be approaching a breakup point.
Elah Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Elah Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's essential indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Meta Platforms and Elah Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Meta Platforms and Elah Holdings

The main advantage of trading using opposite Meta Platforms and Elah Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, Elah Holdings 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 Elah Holdings will offset losses from the drop in Elah Holdings' long position.
The idea behind Meta Platforms and Elah Holdings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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