Correlation Between Prosus and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Prosus and Meta Platforms 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 Prosus and Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosus and Meta Platforms, you can compare the effects of market volatilities on Prosus and Meta Platforms 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 Prosus with a short position of Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosus and Meta Platforms.
Diversification Opportunities for Prosus and Meta Platforms
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prosus and Meta is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Prosus and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms and Prosus 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 Prosus are associated (or correlated) with Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Prosus i.e., Prosus and Meta Platforms go up and down completely randomly.
Pair Corralation between Prosus and Meta Platforms
Assuming the 90 days horizon Prosus is expected to under-perform the Meta Platforms. But the pink sheet apears to be less risky and, when comparing its historical volatility, Prosus is 1.33 times less risky than Meta Platforms. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Meta Platforms is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 56,068 in Meta Platforms on September 5, 2024 and sell it today you would earn a total of 5,297 from holding Meta Platforms or generate 9.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Prosus vs. Meta Platforms
Performance |
| Timeline |
| Prosus |
| Meta Platforms |
Prosus and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosus and Meta Platforms
The main advantage of trading using opposite Prosus and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosus position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.The idea behind Prosus and Meta Platforms pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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