Correlation Between Meta Platforms and XLMedia PLC

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

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

Diversification Opportunities for Meta Platforms and XLMedia PLC

0.54

Correlation Coefficient

Meta Platforms  XLMedia PLC

Very weak diversification

The 3 months correlation between Meta and XLMedia is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and XLMedia PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XLMedia PLC 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 XLMedia PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XLMedia PLC has no effect on the direction of Meta Platforms i.e., Meta Platforms and XLMedia PLC go up and down completely randomly.

Pair Corralation between Meta Platforms and XLMedia PLC

Assuming the 90 days trading horizon Meta Platforms is expected to generate 15.66 times less return on investment than XLMedia PLC. But when comparing it to its historical volatility, Meta Platforms is 1.82 times less risky than XLMedia PLC. It trades about 0.01 of its potential returns per unit of risk. XLMedia PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9.90  in XLMedia PLC on December 28, 2024 and sell it today you would earn a total of  1.10  from holding XLMedia PLC or generate 11.11% return on investment over 90 days.

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

Meta Platforms  vs.  XLMedia PLC

Meta Platforms

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meta Platforms has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Meta Platforms is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

XLMedia PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in XLMedia PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, XLMedia PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meta Platforms and XLMedia PLC

The main advantage of trading using opposite Meta Platforms and XLMedia PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, XLMedia PLC 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 XLMedia PLC will offset losses from the drop in XLMedia PLC's long position.

The idea behind Meta Platforms and XLMedia PLC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.