Correlation Between Rocky Mountain and Meta Platforms

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

By analyzing existing cross correlation between Rocky Mountain Liquor and Meta Platforms CDR, you can compare the effects of market volatilities on Rocky Mountain and Meta Platforms 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 Rocky Mountain with a short position of Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocky Mountain and Meta Platforms.

Diversification Opportunities for Rocky Mountain and Meta Platforms

-0.71

Correlation Coefficient

Rocky Mountain  Meta Platforms

Pay attention - limited upside

The 3 months correlation between Rocky and Meta is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Liquor and Meta Platforms CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms CDR and Rocky Mountain 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 Rocky Mountain Liquor are associated (or correlated) with Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms CDR has no effect on the direction of Rocky Mountain i.e., Rocky Mountain and Meta Platforms go up and down completely randomly.

Pair Corralation between Rocky Mountain and Meta Platforms

Assuming the 90 days horizon Rocky Mountain Liquor is expected to generate 2.44 times more return on investment than Meta Platforms. However, Rocky Mountain is 2.44 times more volatile than Meta Platforms CDR. It trades about 0.15 of its potential returns per unit of risk. Meta Platforms CDR is currently generating about 0.07 per unit of risk. If you would invest  10.00  in Rocky Mountain Liquor on October 22, 2024 and sell it today you would earn a total of  1.00  from holding Rocky Mountain Liquor or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Rocky Mountain Liquor  vs.  Meta Platforms CDR

Rocky Mountain Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Mountain Liquor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Meta Platforms CDR

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms CDR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Meta Platforms is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Rocky Mountain and Meta Platforms

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

The idea behind Rocky Mountain Liquor and Meta Platforms CDR 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.