Correlation Between Meta Platforms and Meituan ADR
Can any of the company-specific risk be diversified away by investing in both Meta Platforms and Meituan ADR 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 Meituan ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and Meituan ADR, you can compare the effects of market volatilities on Meta Platforms and Meituan ADR 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 Meituan ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Meituan ADR.
Diversification Opportunities for Meta Platforms and Meituan ADR
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Meta and Meituan is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Meituan ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan ADR 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 Meituan ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meituan ADR has no effect on the direction of Meta Platforms i.e., Meta Platforms and Meituan ADR go up and down completely randomly.
Pair Corralation between Meta Platforms and Meituan ADR
Given the investment horizon of 90 days Meta Platforms is expected to generate 0.63 times more return on investment than Meituan ADR. However, Meta Platforms is 1.58 times less risky than Meituan ADR. It trades about 0.14 of its potential returns per unit of risk. Meituan ADR is currently generating about 0.02 per unit of risk. If you would invest 17,875 in Meta Platforms on November 2, 2024 and sell it today you would earn a total of 51,603 from holding Meta Platforms or generate 288.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meta Platforms vs. Meituan ADR
Performance |
| Timeline |
| Meta Platforms |
| Meituan ADR |
Meta Platforms and Meituan ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meta Platforms and Meituan ADR
The main advantage of trading using opposite Meta Platforms and Meituan ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, Meituan ADR 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 Meituan ADR will offset losses from the drop in Meituan ADR'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 |
| Meituan ADR vs. Jd Com Inc | Meituan ADR vs. MOGU Inc | Meituan ADR vs. Oriental Culture Holding | Meituan ADR vs. Alibaba Group Holding |
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 Channel module to use Commodity Channel Index to analyze current equity momentum.
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