Correlation Between Distillate and Meta Platforms

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

Diversification Opportunities for Distillate and Meta Platforms

-0.84
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Distillate and Meta is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Distillate US Fundamental and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms and Distillate 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 Distillate US Fundamental 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 Distillate i.e., Distillate and Meta Platforms go up and down completely randomly.

Pair Corralation between Distillate and Meta Platforms

Given the investment horizon of 90 days Distillate US Fundamental is expected to generate 0.26 times more return on investment than Meta Platforms. However, Distillate US Fundamental is 3.85 times less risky than Meta Platforms. It trades about 0.05 of its potential returns per unit of risk. Meta Platforms is currently generating about -0.08 per unit of risk. If you would invest  4,293  in Distillate US Fundamental on December 30, 2023 and sell it today you would earn a total of  1,098  from holding Distillate US Fundamental or generate 25.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy10.93%
ValuesDaily Returns

Distillate US Fundamental  vs.  Meta Platforms

 Performance 
       Timeline  
Distillate US Fundamental 

Risk-Adjusted Performance

19 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Distillate US Fundamental are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Distillate may actually be approaching a critical reversion point that can send shares even higher in April 2024.
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 recent stock price disturbance, may contribute to short-term losses for the investors.

Distillate and Meta Platforms Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Distillate and Meta Platforms

The main advantage of trading using opposite Distillate and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Distillate 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 Distillate US Fundamental 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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