Correlation Between Meta Platforms and Five Star

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

Diversification Opportunities for Meta Platforms and Five Star

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Meta and Five is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Five Star Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Star Bancorp 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 Five Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Star Bancorp has no effect on the direction of Meta Platforms i.e., Meta Platforms and Five Star go up and down completely randomly.

Pair Corralation between Meta Platforms and Five Star

If you would invest  16,949  in Meta Platforms on December 30, 2023 and sell it today you would earn a total of  0.00  from holding Meta Platforms or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy4.55%
ValuesDaily Returns

Meta Platforms  vs.  Five Star Bancorp

 Performance 
       Timeline  
Meta Platforms 

Risk-Adjusted Performance

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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.
Five Star Bancorp 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Five Star Bancorp 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 fundamental drivers remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Meta Platforms and Five Star Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Meta Platforms and Five Star

The main advantage of trading using opposite Meta Platforms and Five Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, Five Star 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 Five Star will offset losses from the drop in Five Star's long position.
The idea behind Meta Platforms and Five Star Bancorp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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