Correlation Between Meta Platforms and Reddit,

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

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

Diversification Opportunities for Meta Platforms and Reddit,

0.73

Correlation Coefficient

Meta Platforms  Reddit,

Poor diversification

The 3 months correlation between Meta and Reddit, is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Reddit, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reddit, 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 Reddit,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reddit, has no effect on the direction of Meta Platforms i.e., Meta Platforms and Reddit, go up and down completely randomly.

Pair Corralation between Meta Platforms and Reddit,

Given the investment horizon of 90 days Meta Platforms is expected to generate 0.36 times more return on investment than Reddit,. However, Meta Platforms is 2.75 times less risky than Reddit,. It trades about 0.01 of its potential returns per unit of risk. Reddit, is currently generating about -0.11 per unit of risk. If you would invest  59,932  in Meta Platforms on December 21, 2024 and sell it today you would lose (307.00) from holding Meta Platforms or give up 0.51% of portfolio value over 90 days.

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

Meta Platforms  vs.  Reddit,

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. Despite somewhat strong basic indicators, Meta Platforms is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Reddit,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reddit, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Meta Platforms and Reddit,

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

The idea behind Meta Platforms and Reddit, 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.