Correlation Between Meta Platforms and Naspers
Can any of the company-specific risk be diversified away by investing in both Meta Platforms and Naspers 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 Naspers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and Naspers Limited, you can compare the effects of market volatilities on Meta Platforms and Naspers 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 Naspers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Naspers.
Diversification Opportunities for Meta Platforms and Naspers
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Meta and Naspers is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Naspers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naspers Limited 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 Naspers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naspers Limited has no effect on the direction of Meta Platforms i.e., Meta Platforms and Naspers go up and down completely randomly.
Pair Corralation between Meta Platforms and Naspers
Given the investment horizon of 90 days Meta Platforms is expected to generate 1.09 times more return on investment than Naspers. However, Meta Platforms is 1.09 times more volatile than Naspers Limited. It trades about 0.01 of its potential returns per unit of risk. Naspers Limited is currently generating about -0.06 per unit of risk. If you would invest 56,369 in Meta Platforms on August 24, 2024 and sell it today you would lose (60.00) from holding Meta Platforms or give up 0.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Meta Platforms vs. Naspers Limited
Performance |
| Timeline |
| Meta Platforms |
| Naspers Limited |
Meta Platforms and Naspers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meta Platforms and Naspers
The main advantage of trading using opposite Meta Platforms and Naspers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, Naspers 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 Naspers will offset losses from the drop in Naspers' 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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