Correlation Between Digital Turbine and Meta Platforms

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

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

Diversification Opportunities for Digital Turbine and Meta Platforms

0.37

Correlation Coefficient

Digital Turbine  Meta Platforms

Weak diversification

The 3 months correlation between Digital and Meta is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Digital Turbine and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms and Digital Turbine 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 Digital Turbine 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 Digital Turbine i.e., Digital Turbine and Meta Platforms go up and down completely randomly.

Pair Corralation between Digital Turbine and Meta Platforms

Given the investment horizon of 90 days Digital Turbine is expected to under-perform the Meta Platforms. In addition to that, Digital Turbine is 1.56 times more volatile than Meta Platforms. It trades about -0.07 of its total potential returns per unit of risk. Meta Platforms is currently generating about -0.09 per unit of volatility. If you would invest  20,047  in Meta Platforms on January 19, 2024 and sell it today you would lose (3,098) from holding Meta Platforms or give up 15.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	8.28%
Values	Daily Returns

Digital Turbine  vs.  Meta Platforms

Digital Turbine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Turbine has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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.

Pair Trading with Digital Turbine and Meta Platforms

The main advantage of trading using opposite Digital Turbine and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Turbine 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 Digital Turbine 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.