Correlation Between Meta Platforms and Allied Properties

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

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

Diversification Opportunities for Meta Platforms and Allied Properties

-0.04

Correlation Coefficient

Meta Platforms  Allied Properties

Good diversification

The 3 months correlation between Meta and Allied is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Allied Properties Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Properties Real 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 Allied Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Properties Real has no effect on the direction of Meta Platforms i.e., Meta Platforms and Allied Properties go up and down completely randomly.

Pair Corralation between Meta Platforms and Allied Properties

Given the investment horizon of 90 days Meta Platforms is expected to generate 0.48 times more return on investment than Allied Properties. However, Meta Platforms is 2.1 times less risky than Allied Properties. It trades about 0.07 of its potential returns per unit of risk. Allied Properties Real is currently generating about 0.01 per unit of risk. If you would invest  19,109  in Meta Platforms on February 8, 2024 and sell it today you would earn a total of  27,715  from holding Meta Platforms or generate 145.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.66%
Values	Daily Returns

Meta Platforms  vs.  Allied Properties Real

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

Allied Properties Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allied Properties Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Allied Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Meta Platforms and Allied Properties

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

The idea behind Meta Platforms and Allied Properties Real 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.