Correlation Between Meta Platforms and Metro
Can any of the company-specific risk be diversified away by investing in both Meta Platforms and Metro 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 Metro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and Metro Inc, you can compare the effects of market volatilities on Meta Platforms and Metro 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 Metro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Metro.
Diversification Opportunities for Meta Platforms and Metro
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Meta and Metro is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Metro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro 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 Metro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Inc has no effect on the direction of Meta Platforms i.e., Meta Platforms and Metro go up and down completely randomly.
Pair Corralation between Meta Platforms and Metro
Given the investment horizon of 90 days Meta Platforms is expected to generate 2.77 times less return on investment than Metro. But when comparing it to its historical volatility, Meta Platforms is 1.12 times less risky than Metro. It trades about 0.07 of its potential returns per unit of risk. Metro Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 6,357 in Metro Inc on November 28, 2024 and sell it today you would earn a total of 378.00 from holding Metro Inc or generate 5.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Meta Platforms vs. Metro Inc
Performance |
| Timeline |
| Meta Platforms |
| Metro Inc |
Meta Platforms and Metro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meta Platforms and Metro
The main advantage of trading using opposite Meta Platforms and Metro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, Metro 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 Metro will offset losses from the drop in Metro'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 |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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