Correlation Between Meta CDR and Alphabet CDR

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

By analyzing existing cross correlation between Meta CDR and Alphabet CDR (CAD Hedged), you can compare the effects of market volatilities on Meta CDR and Alphabet CDR 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 CDR with a short position of Alphabet CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta CDR and Alphabet CDR.

Diversification Opportunities for Meta CDR and Alphabet CDR

0.8

Correlation Coefficient

Meta CDR  Alphabet CDR

Very poor diversification

The 3 months correlation between Meta and Alphabet is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Meta CDR and Alphabet CDR (CAD Hedged) in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet CDR and Meta CDR 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 CDR are associated (or correlated) with Alphabet CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet CDR has no effect on the direction of Meta CDR i.e., Meta CDR and Alphabet CDR go up and down completely randomly.

Pair Corralation between Meta CDR and Alphabet CDR

Assuming the 90 days trading horizon Meta CDR is expected to generate 1.09 times more return on investment than Alphabet CDR. However, Meta CDR is 1.09 times more volatile than Alphabet CDR (CAD Hedged). It trades about 0.25 of its potential returns per unit of risk. Alphabet CDR (CAD Hedged) is currently generating about 0.17 per unit of risk. If you would invest  2,934  in Meta CDR on April 24, 2025 and sell it today you would earn a total of  929.00  from holding Meta CDR or generate 31.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Meta CDR  vs.  Alphabet CDR (CAD Hedged)

Meta CDR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Meta CDR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Meta CDR displayed solid returns over the last few months and may actually be approaching a breakup point.

Alphabet CDR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet CDR (CAD Hedged) are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Alphabet CDR displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meta CDR and Alphabet CDR

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

The idea behind Meta CDR and Alphabet CDR (CAD Hedged) 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.