Correlation Between Seek and Meta Platforms

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

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

Diversification Opportunities for Seek and Meta Platforms

0.36

Correlation Coefficient

Seek  Meta Platforms

Weak diversification

The 3 months correlation between Seek and Meta is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Seek Ltd ADR and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms and Seek 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 Seek Ltd ADR 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 has no effect on the direction of Seek i.e., Seek and Meta Platforms go up and down completely randomly.

Pair Corralation between Seek and Meta Platforms

Assuming the 90 days horizon Seek Ltd ADR is expected to generate 1.09 times more return on investment than Meta Platforms. However, Seek is 1.09 times more volatile than Meta Platforms. It trades about 0.02 of its potential returns per unit of risk. Meta Platforms is currently generating about -0.01 per unit of risk. If you would invest  2,875  in Seek Ltd ADR on December 19, 2024 and sell it today you would earn a total of  30.00  from holding Seek Ltd ADR or generate 1.04% return on investment over 90 days.

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

Seek Ltd ADR  vs.  Meta Platforms

Seek Ltd ADR

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seek Ltd ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Seek is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Seek and Meta Platforms

The main advantage of trading using opposite Seek and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seek 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 Seek Ltd ADR and Meta Platforms 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.