Correlation Between Meta Platforms and Silvercorp Metals

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

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

Diversification Opportunities for Meta Platforms and Silvercorp Metals

0.7

Correlation Coefficient

Meta Platforms  Silvercorp Metals

Poor diversification

The 3 months correlation between Meta and Silvercorp is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms CDR and Silvercorp Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silvercorp Metals 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 CDR are associated (or correlated) with Silvercorp Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silvercorp Metals has no effect on the direction of Meta Platforms i.e., Meta Platforms and Silvercorp Metals go up and down completely randomly.

Pair Corralation between Meta Platforms and Silvercorp Metals

Assuming the 90 days trading horizon Meta Platforms CDR is expected to generate 0.39 times more return on investment than Silvercorp Metals. However, Meta Platforms CDR is 2.55 times less risky than Silvercorp Metals. It trades about 0.13 of its potential returns per unit of risk. Silvercorp Metals is currently generating about 0.01 per unit of risk. If you would invest  2,848  in Meta Platforms CDR on August 31, 2024 and sell it today you would earn a total of  339.00  from holding Meta Platforms CDR or generate 11.9% return on investment over 90 days.

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

Meta Platforms CDR  vs.  Silvercorp Metals

Meta Platforms CDR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms CDR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Meta Platforms may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Silvercorp Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silvercorp Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Silvercorp Metals is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Meta Platforms and Silvercorp Metals

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

The idea behind Meta Platforms CDR and Silvercorp Metals 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.