Correlation Between Facebook and Meta Platforms

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

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

Diversification Opportunities for Facebook and Meta Platforms

0.0

Correlation Coefficient

Facebook  Meta Platforms

Pay attention - limited upside

The 3 months correlation between Facebook and Meta is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Facebook and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms and Facebook 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 Facebook 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 Facebook i.e., Facebook and Meta Platforms go up and down completely randomly.

Pair Corralation between Facebook and Meta Platforms

If you would invest  11,988  in Meta Platforms on September 20, 2024 and sell it today you would earn a total of  47,569  from holding Meta Platforms or generate 396.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Facebook  vs.  Meta Platforms

Facebook

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Facebook has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Facebook is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Meta Platforms

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Meta Platforms may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Facebook and Meta Platforms

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

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..