Correlation Between Meta Platforms and GoPro

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

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

Diversification Opportunities for Meta Platforms and GoPro

-0.11

Correlation Coefficient

Meta Platforms  GoPro

Good diversification

The 3 months correlation between Meta and GoPro is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and GoPro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoPro Inc 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 GoPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoPro Inc has no effect on the direction of Meta Platforms i.e., Meta Platforms and GoPro go up and down completely randomly.

Pair Corralation between Meta Platforms and GoPro

Allowing for the 90-day total investment horizon Meta Platforms is expected to under-perform the GoPro. In addition to that, Meta Platforms is 1.22 times more volatile than GoPro Inc. It trades about -0.11 of its total potential returns per unit of risk. GoPro Inc is currently generating about -0.08 per unit of volatility. If you would invest  649.00  in GoPro Inc on January 30, 2024 and sell it today you would lose (476.00) from holding GoPro Inc or give up 73.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	6.85%
Values	Daily Returns

Meta Platforms  vs.  GoPro Inc

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.

GoPro Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoPro Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Meta Platforms and GoPro

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

The idea behind Meta Platforms and GoPro Inc 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.