Correlation Between Meta Platforms and Weibo Corp
Can any of the company-specific risk be diversified away by investing in both Meta Platforms and Weibo Corp 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 Weibo Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and Weibo Corp, you can compare the effects of market volatilities on Meta Platforms and Weibo Corp 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 Weibo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Weibo Corp.
Diversification Opportunities for Meta Platforms and Weibo Corp
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meta and Weibo is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp 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 Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of Meta Platforms i.e., Meta Platforms and Weibo Corp go up and down completely randomly.
Pair Corralation between Meta Platforms and Weibo Corp
Given the investment horizon of 90 days Meta Platforms is expected to generate 0.57 times more return on investment than Weibo Corp. However, Meta Platforms is 1.75 times less risky than Weibo Corp. It trades about 0.31 of its potential returns per unit of risk. Weibo Corp is currently generating about 0.18 per unit of risk. If you would invest 55,395 in Meta Platforms on November 18, 2024 and sell it today you would earn a total of 18,272 from holding Meta Platforms or generate 32.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meta Platforms vs. Weibo Corp
Performance |
| Timeline |
| Meta Platforms |
| Weibo Corp |
Meta Platforms and Weibo Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meta Platforms and Weibo Corp
The main advantage of trading using opposite Meta Platforms and Weibo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, Weibo Corp 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 Weibo Corp will offset losses from the drop in Weibo Corp'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 |
| Weibo Corp vs. YY Inc Class | Weibo Corp vs. DouYu International Holdings | Weibo Corp vs. Tencent Music Entertainment | Weibo Corp vs. Autohome |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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