Correlation Between Vanguard Information and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Vanguard Information 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 Vanguard Information and Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Information Technology and Meta Platforms, you can compare the effects of market volatilities on Vanguard Information 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 Vanguard Information with a short position of Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Information and Meta Platforms.
Diversification Opportunities for Vanguard Information and Meta Platforms
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Meta is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Information Technolog and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms and Vanguard Information 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 Vanguard Information Technology 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 Vanguard Information i.e., Vanguard Information and Meta Platforms go up and down completely randomly.
Pair Corralation between Vanguard Information and Meta Platforms
Considering the 90-day investment horizon Vanguard Information Technology is expected to generate 0.45 times more return on investment than Meta Platforms. However, Vanguard Information Technology is 2.24 times less risky than Meta Platforms. It trades about 0.05 of its potential returns per unit of risk. Meta Platforms is currently generating about -0.13 per unit of risk. If you would invest 35,679 in Vanguard Information Technology on January 26, 2024 and sell it today you would earn a total of 13,845 from holding Vanguard Information Technology or generate 38.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 7.27% |
| Values | Daily Returns |
Vanguard Information Technolog vs. Meta Platforms
Performance |
| Timeline |
| Vanguard Information |
| Meta Platforms |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Vanguard Information and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Information and Meta Platforms
The main advantage of trading using opposite Vanguard Information and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Information 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 Vanguard Information Technology 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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