Correlation Between Meta Platforms and TrueCar

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

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

Diversification Opportunities for Meta Platforms and TrueCar

0.13

Correlation Coefficient

Meta Platforms  TrueCar

Average diversification

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

Pair Corralation between Meta Platforms and TrueCar

Given the investment horizon of 90 days Meta Platforms is expected to generate 0.52 times more return on investment than TrueCar. However, Meta Platforms is 1.94 times less risky than TrueCar. It trades about 0.03 of its potential returns per unit of risk. TrueCar is currently generating about -0.29 per unit of risk. If you would invest  60,281  in Meta Platforms on December 25, 2024 and sell it today you would earn a total of  1,604  from holding Meta Platforms or generate 2.66% return on investment over 90 days.

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

Meta Platforms  vs.  TrueCar

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.

TrueCar

Risk-Adjusted Performance

Very Weak

Over the last 90 days TrueCar 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 basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Meta Platforms and TrueCar

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

The idea behind Meta Platforms and TrueCar 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.