Correlation Between General Electric and Meta Platforms

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Can any of the company-specific risk be diversified away by investing in both General Electric 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 General Electric and Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Electric and Meta Platforms, you can compare the effects of market volatilities on General Electric 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 General Electric with a short position of Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Electric and Meta Platforms.

Diversification Opportunities for General Electric and Meta Platforms

-0.81
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between General and Meta is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Electric and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms and General Electric 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 General Electric 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 General Electric i.e., General Electric and Meta Platforms go up and down completely randomly.

Pair Corralation between General Electric and Meta Platforms

If you would invest  15,399  in General Electric on December 29, 2023 and sell it today you would earn a total of  2,613  from holding General Electric or generate 16.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy4.55%
ValuesDaily Returns

General Electric  vs.  Meta Platforms

 Performance 
       Timeline  
General Electric 

Risk-Adjusted Performance

35 of 100

 
Low
 
High
Very Strong
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, General Electric exhibited solid returns over the last few months and may actually be approaching a breakup point.
Meta Platforms 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 new stock price disturbance, may contribute to short-term losses for the investors.

General Electric and Meta Platforms Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Electric and Meta Platforms

The main advantage of trading using opposite General Electric and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Electric 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 General Electric 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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