Correlation Between Haier Smart and Meta Platforms

Can any of the company-specific risk be diversified away by investing in both Haier Smart 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 Haier Smart and Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Haier Smart Home and Meta Platforms, you can compare the effects of market volatilities on Haier Smart 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 Haier Smart with a short position of Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haier Smart and Meta Platforms.

Diversification Opportunities for Haier Smart and Meta Platforms

0.58

Correlation Coefficient

Haier Smart  Meta Platforms

Very weak diversification

The 3 months correlation between Haier and Meta is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Haier Smart Home and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms and Haier Smart 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 Haier Smart Home 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 Haier Smart i.e., Haier Smart and Meta Platforms go up and down completely randomly.

Pair Corralation between Haier Smart and Meta Platforms

Assuming the 90 days trading horizon Haier Smart Home is expected to generate 0.61 times more return on investment than Meta Platforms. However, Haier Smart Home is 1.64 times less risky than Meta Platforms. It trades about 0.12 of its potential returns per unit of risk. Meta Platforms is currently generating about -0.11 per unit of risk. If you would invest  182.00  in Haier Smart Home on December 2, 2024 and sell it today you would earn a total of  6.00  from holding Haier Smart Home or generate 3.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Haier Smart Home  vs.  Meta Platforms

Haier Smart Home

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Haier Smart may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Meta Platforms

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Meta Platforms exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Haier Smart and Meta Platforms

The main advantage of trading using opposite Haier Smart and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haier Smart 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 Haier Smart Home 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.