Correlation Between Meta Platforms and Asahi Group

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

By analyzing existing cross correlation between Meta Platforms and Asahi Group Holdings, you can compare the effects of market volatilities on Meta Platforms and Asahi Group 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 Asahi Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Asahi Group.

Diversification Opportunities for Meta Platforms and Asahi Group

-0.47

Correlation Coefficient

Meta Platforms  Asahi Group

Very good diversification

The 3 months correlation between Meta and Asahi is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Asahi Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asahi Group Holdings 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 Asahi Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asahi Group Holdings has no effect on the direction of Meta Platforms i.e., Meta Platforms and Asahi Group go up and down completely randomly.

Pair Corralation between Meta Platforms and Asahi Group

Given the investment horizon of 90 days Meta Platforms is expected to under-perform the Asahi Group. In addition to that, Meta Platforms is 3.26 times more volatile than Asahi Group Holdings. It trades about -0.18 of its total potential returns per unit of risk. Asahi Group Holdings is currently generating about -0.31 per unit of volatility. If you would invest  3,700  in Asahi Group Holdings on February 4, 2024 and sell it today you would lose (219.00) from holding Asahi Group Holdings or give up 5.92% of portfolio value over 90 days.

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

Meta Platforms  vs.  Asahi Group Holdings

Meta Platforms

Risk-Adjusted Performance

0 of 100

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Asahi Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asahi Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Meta Platforms and Asahi Group

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

The idea behind Meta Platforms and Asahi Group Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.