Correlation Between Meta Platforms and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Meta Platforms and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and Dow Jones Hong, you can compare the effects of market volatilities on Meta Platforms and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Dow Jones.
Diversification Opportunities for Meta Platforms and Dow Jones
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meta and Dow is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Dow Jones Hong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Hong 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Hong has no effect on the direction of Meta Platforms i.e., Meta Platforms and Dow Jones go up and down completely randomly.
Pair Corralation between Meta Platforms and Dow Jones
Given the investment horizon of 90 days Meta Platforms is expected to generate 2.01 times more return on investment than Dow Jones. However, Meta Platforms is 2.01 times more volatile than Dow Jones Hong. It trades about 0.15 of its potential returns per unit of risk. Dow Jones Hong is currently generating about -0.03 per unit of risk. If you would invest 11,437 in Meta Platforms on September 2, 2024 and sell it today you would earn a total of 45,995 from holding Meta Platforms or generate 402.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.06% |
| Values | Daily Returns |
Meta Platforms vs. Dow Jones Hong
Performance |
| Timeline |
Meta Platforms and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Meta Platforms
Pair trading matchups for Meta Platforms
Dow Jones Hong
Pair trading matchups for Dow Jones
Pair Trading with Meta Platforms and Dow Jones
The main advantage of trading using opposite Meta Platforms and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Meta Platforms vs. MediaAlpha | Meta Platforms vs. Asset Entities Class | Meta Platforms vs. Shutterstock | Meta Platforms vs. Match Group |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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