Correlation Between Meta Platforms and Gold Futures

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

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

Diversification Opportunities for Meta Platforms and Gold Futures

0.75

Correlation Coefficient

Meta Platforms  Gold Futures

Poor diversification

The 3 months correlation between Meta and Gold is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Gold Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Futures 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 Gold Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Futures has no effect on the direction of Meta Platforms i.e., Meta Platforms and Gold Futures go up and down completely randomly.

Pair Corralation between Meta Platforms and Gold Futures

Given the investment horizon of 90 days Meta Platforms is expected to generate 1.91 times more return on investment than Gold Futures. However, Meta Platforms is 1.91 times more volatile than Gold Futures. It trades about 0.15 of its potential returns per unit of risk. Gold Futures is currently generating about 0.16 per unit of risk. If you would invest  57,386  in Meta Platforms on November 28, 2024 and sell it today you would earn a total of  8,364  from holding Meta Platforms or generate 14.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.06%
Values	Daily Returns

Meta Platforms  vs.  Gold Futures

Meta Platforms

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Meta Platforms sustained solid returns over the last few months and may actually be approaching a breakup point.

Gold Futures

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Futures are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Gold Futures may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Meta Platforms and Gold Futures

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

The idea behind Meta Platforms and Gold Futures 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.