Correlation Between Meta Platforms and Living Cell

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

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

Diversification Opportunities for Meta Platforms and Living Cell

0.13

Correlation Coefficient

Meta Platforms  Living Cell

Average diversification

The 3 months correlation between Meta and Living is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Living Cell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Living Cell Technologies 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 Living Cell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Living Cell Technologies has no effect on the direction of Meta Platforms i.e., Meta Platforms and Living Cell go up and down completely randomly.

Pair Corralation between Meta Platforms and Living Cell

Given the investment horizon of 90 days Meta Platforms is expected to generate 134.31 times less return on investment than Living Cell. But when comparing it to its historical volatility, Meta Platforms is 22.89 times less risky than Living Cell. It trades about 0.03 of its potential returns per unit of risk. Living Cell Technologies is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.16  in Living Cell Technologies on December 28, 2024 and sell it today you would earn a total of  0.24  from holding Living Cell Technologies or generate 150.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Meta Platforms  vs.  Living Cell Technologies

Meta Platforms

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Meta Platforms is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Living Cell Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Living Cell Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Living Cell reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meta Platforms and Living Cell

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

The idea behind Meta Platforms and Living Cell Technologies 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.