Correlation Between Meta Platforms and E Mini
Can any of the company-specific risk be diversified away by investing in both Meta Platforms and E Mini 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 E Mini into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and E Mini SP 500, you can compare the effects of market volatilities on Meta Platforms and E Mini 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 E Mini. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and E Mini.
Diversification Opportunities for Meta Platforms and E Mini
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Meta and ESUSD is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and E Mini SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Mini SP 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 E Mini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Mini SP has no effect on the direction of Meta Platforms i.e., Meta Platforms and E Mini go up and down completely randomly.
Pair Corralation between Meta Platforms and E Mini
Given the investment horizon of 90 days Meta Platforms is expected to generate 3.0 times more return on investment than E Mini. However, Meta Platforms is 3.0 times more volatile than E Mini SP 500. It trades about 0.14 of its potential returns per unit of risk. E Mini SP 500 is currently generating about 0.1 per unit of risk. If you would invest 12,206 in Meta Platforms on August 26, 2024 and sell it today you would earn a total of 43,708 from holding Meta Platforms or generate 358.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.26% |
| Values | Daily Returns |
Meta Platforms vs. E Mini SP 500
Performance |
| Timeline |
| Meta Platforms |
| E Mini SP |
Meta Platforms and E Mini Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meta Platforms and E Mini
The main advantage of trading using opposite Meta Platforms and E Mini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, E Mini 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 E Mini will offset losses from the drop in E Mini'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 |
| E Mini vs. Natural Gas | E Mini vs. Five Year Treasury Note | E Mini vs. Micro Gold Futures | E Mini vs. Class III Milk |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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