Correlation Between Snap and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Meta Platforms, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Meta Platforms.
Diversification Opportunities for Snap and Meta Platforms
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Snap and Meta is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms and Snap 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 Snap Inc 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 Snap i.e., Snap and Meta Platforms go up and down completely randomly.
Pair Corralation between Snap and Meta Platforms
Given the investment horizon of 90 days Snap Inc is expected to generate 1.38 times more return on investment than Meta Platforms. However, Snap is 1.38 times more volatile than Meta Platforms. It trades about -0.01 of its potential returns per unit of risk. Meta Platforms is currently generating about -0.09 per unit of risk. If you would invest 2,846 in Snap Inc on January 19, 2024 and sell it today you would lose (1,698) from holding Snap Inc or give up 59.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 8.28% |
| Values | Daily Returns |
Snap Inc vs. Meta Platforms
Performance |
| Timeline |
| Snap Inc |
| Meta Platforms |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Snap and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Meta Platforms
The main advantage of trading using opposite Snap and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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 Snap Inc 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.| Meta Platforms vs. Meta Platforms | Meta Platforms vs. Alphabet Inc Class A | Meta Platforms vs. Twilio Inc | Meta Platforms vs. Snap Inc |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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