Correlation Between Meta Platforms and Pershing Square
Can any of the company-specific risk be diversified away by investing in both Meta Platforms and Pershing Square 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 Pershing Square into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and Pershing Square Holdings, you can compare the effects of market volatilities on Meta Platforms and Pershing Square 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 Pershing Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Pershing Square.
Diversification Opportunities for Meta Platforms and Pershing Square
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Meta and Pershing is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Pershing Square Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pershing Square 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 Pershing Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pershing Square Holdings has no effect on the direction of Meta Platforms i.e., Meta Platforms and Pershing Square go up and down completely randomly.
Pair Corralation between Meta Platforms and Pershing Square
Given the investment horizon of 90 days Meta Platforms is expected to generate 3.26 times less return on investment than Pershing Square. But when comparing it to its historical volatility, Meta Platforms is 1.1 times less risky than Pershing Square. It trades about 0.07 of its potential returns per unit of risk. Pershing Square Holdings is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 5,166 in Pershing Square Holdings on November 28, 2024 and sell it today you would earn a total of 384.00 from holding Pershing Square Holdings or generate 7.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meta Platforms vs. Pershing Square Holdings
Performance |
| Timeline |
| Meta Platforms |
| Pershing Square Holdings |
Meta Platforms and Pershing Square Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meta Platforms and Pershing Square
The main advantage of trading using opposite Meta Platforms and Pershing Square positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, Pershing Square 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 Pershing Square will offset losses from the drop in Pershing Square'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 |
| Pershing Square vs. Pershing Square Holdings | Pershing Square vs. Hon Hai Precision | Pershing Square vs. Glaukos Corp |
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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