Correlation Between Meta Platforms and SP 500
Can any of the company-specific risk be diversified away by investing in both Meta Platforms and SP 500 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 SP 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and SP 500 MINI, you can compare the effects of market volatilities on Meta Platforms and SP 500 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 SP 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and SP 500.
Diversification Opportunities for Meta Platforms and SP 500
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meta and XSP is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and SP 500 MINI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP 500 MINI 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 SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 MINI has no effect on the direction of Meta Platforms i.e., Meta Platforms and SP 500 go up and down completely randomly.
Pair Corralation between Meta Platforms and SP 500
Given the investment horizon of 90 days Meta Platforms is expected to generate 2.98 times more return on investment than SP 500. However, Meta Platforms is 2.98 times more volatile than SP 500 MINI. It trades about 0.15 of its potential returns per unit of risk. SP 500 MINI is currently generating about 0.11 per unit of risk. If you would invest 11,988 in Meta Platforms on September 20, 2024 and sell it today you would earn a total of 49,956 from holding Meta Platforms or generate 416.72% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Meta Platforms vs. SP 500 MINI
Performance |
Timeline |
Meta Platforms and SP 500 Volatility Contrast
Predicted Return Density |
Returns |
Meta Platforms
Pair trading matchups for Meta Platforms
SP 500 MINI
Pair trading matchups for SP 500
Pair Trading with Meta Platforms and SP 500
The main advantage of trading using opposite Meta Platforms and SP 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, SP 500 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 SP 500 will offset losses from the drop in SP 500's long position.Meta Platforms vs. Twilio Inc | Meta Platforms vs. Snap Inc | Meta Platforms vs. Baidu Inc | Meta Platforms vs. Tencent Holdings Ltd |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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