Correlation Between Meta Platforms and Infinity Pharmaceuticals

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

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

Diversification Opportunities for Meta Platforms and Infinity Pharmaceuticals

0.21

Correlation Coefficient

Meta Platforms  Infinity Pharmaceuticals

Modest diversification

The 3 months correlation between Meta and Infinity is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Infinity Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infinity Pharmaceuticals 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 Infinity Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infinity Pharmaceuticals has no effect on the direction of Meta Platforms i.e., Meta Platforms and Infinity Pharmaceuticals go up and down completely randomly.

Pair Corralation between Meta Platforms and Infinity Pharmaceuticals

Allowing for the 90-day total investment horizon Meta Platforms is expected to under-perform the Infinity Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Meta Platforms is 2.63 times less risky than Infinity Pharmaceuticals. The stock trades about -0.13 of its potential returns per unit of risk. The Infinity Pharmaceuticals is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  71.00  in Infinity Pharmaceuticals on January 26, 2024 and sell it today you would lose (67.00) from holding Infinity Pharmaceuticals or give up 94.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	10.56%
Values	Daily Returns

Meta Platforms  vs.  Infinity Pharmaceuticals

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 fundamental drivers, Meta Platforms is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Infinity Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infinity Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Infinity Pharmaceuticals is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Meta Platforms and Infinity Pharmaceuticals

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

The idea behind Meta Platforms and Infinity Pharmaceuticals 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.